DENVER, March 31 /PRNewswire/ -- Venoco, Inc. (Bloomberg Ticker: **VEN) today announced that it has acquired TexCal Energy (LP) LLC, an independent exploration and production company with properties in Texas and California for $456 million in cash.
TexCal's proved reserves were 31.4 million barrels of oil equivalent (MMBOE) at December 31, 2005 according to a report prepared by DeGolyer and MacNaughton, TexCal's third-party reservoir engineering firm. In addition to the proved reserves, Venoco has internally estimated an additional 22 MMBOE of probable and possible reserves related to the TexCal assets. Based on the 31.4 MMBOE of proved reserves, the transaction implies a cost of $14.50 per BOE. Including the 22 MMBOE of probable and possible reserves, the transaction implies a cost of $8.52 per barrel of oil equivalent (BOE). TexCal's current daily net production is approximately 5,200 BOE per day (BOE/d), implying a reserve to production ratio of 16.5 years.
In the Sacramento Basin, Venoco and TexCal were the two most active drillers in 2005, drilling 21 and 18 wells, respectively. In 2005 TexCal increased its production in the basin from 4.2 million cubic feet per day (MMcf/d) in the first quarter to 17.8 MMcf/d in the fourth quarter. TexCal's Sacramento Basin acreage is concentrated in the Grimes producing area, where Venoco has been aggressively adding to its core acreage position.
TexCal controls interests in several key fields in Texas where its largest asset is the Hastings field. Hastings is a major field which has produced over 600 MMBOE during its life. A limited amount of capital has been invested in the field over the past 10 years and Venoco believes that the field presents significant redevelopment opportunities.
TexCal, like Venoco, operates over 90% of its assets, generally with high working interests. Operating control gives Venoco the opportunity to accelerate drilling and development plans on the acquired assets.
Tim Marquez, Venoco, Inc.'s Chairman and Chief Executive Officer, commented that Venoco considers the TexCal acquisition exciting for several reasons. "First, the transaction gives Venoco a dominant position in the Sacramento Basin's developing resource play with considerable drilling opportunity, and strong full-cycle economics. Second, the transaction expands our probable and possible reserve base in areas with good infrastructure and attractive oil and natural gas price differentials to NYMEX. Third, the TexCal properties have had a history of financial distress and underdevelopment, which Venoco believes creates a significant opportunity for additional exploitation. In particular, the Hastings field has a number of operational and engineering opportunities to increase production and reserves. And finally, the acquisition strengthens Venoco's cash margins per BOE."
Venoco will continue to focus on consolidating transactions within California and select other opportunities consistent with its strategy of exploiting large, mature fields with significant production histories and substantial potential for additional development.
Pro forma for the transaction, Venoco will have estimated total reserves of 79 MMBOE, and a reserve base that is 63% oil, 52% onshore and 64% proved developed with a proved reserve to production ratio of 12.3 years based on December 2005 production.
Venoco financed the acquisition through loans made available by the Bank of Montreal, Credit Suisse and Lehman Brothers under its revolving credit facility and a new $350 million second lien term loan facility. In connection with the transaction, Venoco entered into a collateral trust agreement to provide liens securing its outstanding 8.75% senior notes equally and ratably with the liens securing the second lien term loan. Also related to the transaction, Venoco hedged a significant portion of projected future production through a series of swaps, collars and puts. A summary of Venoco's current hedge positions is provided as an attachment to this release.
Credit Suisse and Lehman Brothers were financial advisors to Venoco for this transaction. Citigroup Global Markets Inc., Merrill Lynch & Co. and Randall & Dewey (a division of Jefferies) acted as financial advisors to TexCal in connection with the transaction.
Key Personnel
The company also announced two personnel related items. First, that it has promoted Kevin Morrato to Vice President of Sacramento Basin operations. Mr. Morrato has been General Manager of the Basin where 21 wells were drilled in 2005 and more than 42 wells were reworked or recompleted. Mr. Morrato has 24 years of industry experience and a BS degree in geology from University of New Mexico. Mr. Morrato is a member of AAPG, RMAG and is a registered geologist with the State of Wyoming.
Second, Venoco has hired Jeff Janik as Senior Vice President of Texas operations. Mr. Janik comes from TexCal Energy, where he served as Vice President-Chief Operating Officer for the past three years. He has been in the oil industry for 31 years, has a degree in Ocean Engineering from Texas A&M University and is a member of the API, AADE and CIPA.
About the Company
Venoco is an independent energy company primarily engaged in the acquisition, exploitation and development of oil and natural gas properties in California and Texas. It has headquarters in Denver, Colorado and regional offices in Carpinteria, California and Houston, Texas. Venoco operates three offshore platforms in the Santa Barbara Channel, has non-operating interests in three other platforms, operates two onshore properties in Southern California, operates extensive operations in Northern California's Sacramento Basin and operates numerous fields in the Texas Gulf Coast and South Texas.
Conference Call & Webcast
The Company's 2005 earnings and operational review conference call will begin at 1 p.m. Eastern (10 a.m. Pacific) on Monday, April 3, 2006. You may participate by calling 1-(800) 374-2482 and using Conference ID# 7293944. Information on accessing the recorded call will be available on the Investor Information page of the Company's website http://www.venocoinc.com/.
Forward-looking Statements
Statements made in this news release, including those relating to future growth and performance, drilling inventory, economic returns, development opportunities, production growth targets, cash flow, reserve base, and future results of operation and financial condition are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are based on assumptions and estimates that management believes are reasonable based on currently available information; however, management's assumptions and the Company's future performance are both subject to a wide range of business risks and uncertainties and there is no assurance that these goals and projections can or will be met. Any number of factors could cause actual results to differ materially from those in the forward-looking statements, including, but not limited to, ability to acquire properties that meet our objectives, the timing and extent of changes in oil and gas prices, changes in underlying demand for oil and gas, the timing and results of drilling activity, the availability of and cost of obtaining drilling equipment and technical personnel, delays in completing production, treatment and transportation facilities, higher than expected production costs and other expenses, pipeline curtailments by third-parties and failure to close pending acquisitions. Further information on risks and uncertainties is available in the Company's filings with the Securities and Exchange Commission, which are incorporated by this reference as though fully set forth herein.
Venoco, Inc.
Summary of Derivative Contracts
Minimum Maximum
Barrels/day Avg. Prices Barrels/day Avg. Prices
Crude oil hedges at March 31, 2006 for production
in:
1/1/06 - 12/31/06 10,007 47.32 6,507 58.17
1/1/07 - 12/31/07 7,313 49.72 7,313 71.58
1/1/08 - 12/31/08 4,950 54.43 4,950 75.38
1/1/09 - 12/31/09 4,580 53.94 4,580 76.78
Minimum Maximum
MMBtu/Day Avg. Prices MMBtu/Day Avg. Prices
Natural gas hedges at March 31, 2006 for production
in:
1/1/06 - 12/31/06 25,027 7.15 19,027 10.79
1/1/07 - 12/31/07 21,000 7.42 15,436 11.46
1/1/08 - 12/31/08 13,500 8.00 11,947 12.24
1/1/09 - 12/31/09 9,500 7.61 9,500 12.10
This release can be found at http://www.venocoinc.com/
