Baytex Energy Tackles Eagle Ford Debt with Bakken Sale

August 1, 2014 Kirk Eggleston

Calgary-based Baytex Energy, a recent entrant into the Eagle Ford, announced in late June of 2014 that it's selling its Bakken Shale assets in North Dakota to pay down a portion of its Eagle Ford debt. In February, the company added 22,200 net contiguous acres in South Texas through its $2.8 billion acquisition of Aurora Oil & Gas, which closed in June of 2014.

In anticipation of the Eagle Ford transaction, Baytex conducted a contingent resources assessment of its assets. During that process, the company earmarked certain properties for divestiture, including its Bakken assets.

Baytex Eagle Ford Debt Primary Reason for Bakken Divestiture

SM Energy will pay Baytex $330.5 million for 61,000 net acres in the Bakken. The transaction is expected to close toward the end of the third quarter with after tax net proceeds from the sale, estimated at $275-million. Company officials say the money will be directly applied against outstanding bank indebtedness.

Aurora Oil & Gas's Production Increases in the First Quarter of 2014

May 2, 2014 Kirk Eggleston

Eagle Ford-focused Aurora Oil & Gas, which will soon be absorbed by Baytex Energy, had first quarter estimated gross production of 28,600 (21,100 net) boe/d. That's a 54% increase over the first quarter of 2013, and a 16% increase over Aurora's fourth quarter production in the play.

In February of 2014, Baytex Energy agreed to purchase Aurora for $2.6 billion. When the deal closes, it will include 22,000 net contiguous acres in the Sugarkane Field. The acreage is located in what is commonly referred to as the "sweet spot" or oil window of the Eagle Ford Shale.

Aurora Oil & Gas Eagle Ford Q1 2014 Operations Update

During the first quarter, 32 gross new Eagle Ford wells (8.6 net) were put into production for a total of 419 gross producing wells (111.7 net). A total of 57 gross new wells (15 net) were spudded during the first quarter of 2014, and at the end of the quarter, drilling operations continued on 10 wells, while 29 wells were awaiting fracture stimulation.

Aurora's net acreage covers Karnes, Live Oak and Atascosa counties. Revenue from oil and gas sales in the first quarter was $182 million.

Aurora Oil & Gas Eagle Ford Q1 Highlights

54% increase over Q1 2013 to 28,600 (21,100 net) boe/d
16% increase Q4 production
Baytex Energy agreed to purchase Aurora for $2.6 billion
32 gross new Eagle Ford wells (8.6 net) were put into production
57 gross new wells (15 net) were spudded
Revenue from oil and gas sales in the first quarter was $182 million

Baytex Energy - Aurora Deal for Eagle Ford Assets - ~$2.6 Billion

February 10, 2014 Kirk Eggleston

Canadian-based Baytex Energy agreed to buy Australian-based Aurora Oil and Gas for ~$2.6 billion dollars in early February 2014.

Aurora has approximately 22,000 net contiguous acres in the Sugarkane Field, located in the heart of the Eagle Ford Shale., with 97% held by production.

In March of 2013, Aurora purchased 27 net acres near the Sugarkane Field for $117 million.

The Sugarkane Field

Aurora’s fourth-quarter 2013 gross production was 24,678boe/d (82% liquids) of mostly light, high-quality crude oil from the Sugarkane Field.

“The Eagle Ford play provides not only exposure to light oil, but also to Gulf Coast crude oil markets with established transportation systems. A portion of the produced crude oil benefits from Louisiana Light Sweet based pricing, which currently trades at a premium to WTI.”

— James Bowzer, Baytex CEO

In addition to sustainable infrastructure, the deal was also appealing to Baytex because of reserves upside potential from well downspacing, improving completion techniques and new development targets in additional zones.

Marathon is the majority operator of the Eagle Ford acreage.

Baytex Added Reserves and 2014 Outlook

The deal adds proved reserves to Baytex of 106.7 million boe and proved plus probable reserves of 166.6 million boe. The company sees reserve upsides in other horizons such as the Austin Chalk and Upper Eagle Ford formations, through downspacing and improving completion techniques.

Prior to the purchase agreement, Aurora's forecasted production for 2014 was 29,000 boe/d to 32,000 boe/d. That's a 43% increase in production over 2013.

Baytex-Aurora Deal at a Glance

Early February 2014, Baytex agrees to buy Aurora for ~$2.6 billion
Aurora Oil acreage assets include 22,000 net contiguous acres in Eagle Ford
97% of Aurora acreage is held by production
Aurora's Q4 2013 gross production was 24,678boe/d (82% liquids)
Marathon is primary operator of acreage in the Eagle Ford
Forecasted production for 2014 is 29,000 boe/d - 32,000 boe/d