(Source: Business Wire)
Pioneer Southwest Energy Partners L.P. ("Pioneer Southwest" or the "Partnership") (NYSE:PSE) today announced that it has acquired certain oil and gas properties in the Spraberry field in West Texas from Pioneer Natural Resources Company ("Pioneer") for $171.2 million in cash. The transaction value also includes the assignment of 2009 through 2013 commodity price derivative positions.
The acquisition is accretive to Pioneer Southwest's operating cash flow, which is forecast to increase in 2010 and 2011 by more than 35% and 55%, respectively, as compared to pre-acquisition operating cash flow forecasts for the same periods. The acquisition is also expected to improve the Partnership's coverage ratio (distributable cash flow in excess of distributions) to approximately 1.15 in 2010.
The acquired properties have estimated proved reserves of approximately 18.9 million barrels oil equivalent, of which 37% are proved developed reserves and 63% are proved undeveloped reserves (approximately 170 40-acre drilling locations). Netherland, Sewell & Associates, Inc., an independent reserve engineering firm, audited the proved reserves of the acquired properties. Production from the acquired properties is approximately 1,300 barrels oil equivalent per day. Of this amount, approximately 65% is oil, 20% is natural gas liquids and 15% is gas.
The Board of Directors of the general partner of the Partnership approved the acquisition, based in part on the unanimous recommendation in favor of the acquisition from its Conflicts Committee. This committee of independent directors retained independent legal and financial advisors to assist in evaluating the transaction. The investment bank of Houlihan Lokey acted as the financial advisor to the Committee and delivered a fairness opinion for the use of the Conflicts Committee in connection with the transaction.
Pioneer Southwest used its $30 million of cash on hand and borrowings under its credit facility to fund this transaction and related expenses. The Partnership's liquidity position is expected to remain strong after the acquisition with approximately $135 million of availability under its credit facility. The Partnership is considering a public offering of common units later this year of approximately $75 million, subject to market conditions, to retire a portion of the debt incurred to fund the acquisition and to enhance its liquidity and financial flexibility.
