Welcome!

News Feed Item

Earthstone Energy, Inc. and Oak Valley Resources, LLC Announce Strategic Combination

DENVER, CO and HOUSTON, TX -- (Marketwired) -- 05/15/14 -- Earthstone Energy, Inc. (NYSE MKT: ESTE) ("Earthstone" or the "Company") and privately-held Oak Valley Resources, LLC ("Oak Valley") jointly announced today that they have entered into a definitive exchange agreement (the "Agreement") under which Earthstone will acquire all of the subsidiaries of Oak Valley, inclusive of producing assets, undeveloped acreage, and approximately $138 million of cash, in exchange for approximately 9.1 million shares of common stock of Earthstone (the "Transaction"). The specified amount of cash represents existing cash on hand plus $107 million of capital commitments available to Oak Valley from its members in accordance with the terms of its limited liability company agreement. Upon completion of the Transaction, there will be approximately 10.9 million shares of Earthstone common stock outstanding with current Earthstone stockholders owning 16% of the combined company and Oak Valley owning the remaining 84%.

At the closing of the Transaction, which is subject to the approval of Earthstone stockholders, Oak Valley's management team, including President and CEO Frank A. Lodzinski, will assume the same roles in the combined company. Mr. Lodzinski will also be a director of the combined company. Ray Singleton, the Company's current President and CEO, will continue to serve in a senior executive position and as a director. All of the other board positions of the combined company will be filled by Oak Valley. Additionally, the combined company will relocate its headquarters to Houston, Texas, while maintaining an office in Denver, Colorado to focus on growth opportunities located in the Bakken and Rockies.

Headquartered in Houston, Texas, Oak Valley was founded in December 2012 and focuses on developing and producing oil and natural gas, with properties primarily located in the Eagle Ford trend of South Texas. Oak Valley's assets include:

  • 2,150 barrels of oil equivalent per day ("Boepd") of production (quarter ended December 31, 2013);

  • 11.4 million barrels of oil equivalent ("MMBoe") of proved reserves (65% liquids and 32% proved developed) as estimated by Cawley, Gillespie & Associates, Inc. effective December 31, 2013; and

  • Total oil and gas leasehold acreage of over 67,000 net acres.

Earthstone is currently producing approximately 600 Boepd and had proved reserves of 3.2 MMBoe (82% liquids and 60% proved developed) as estimated by Earthstone effective December 31, 2013.

Management from both companies believe that the Transaction has significant benefits, including:

  • Proven Management Team: Strong management and technical team with demonstrated ability to generate and execute substantial drilling programs. Mr. Lodzinski and his senior management team have repeatedly executed successful growth strategies, creating significant value for shareholders.

  • Increased Scale: Assets are concentrated in the prolific Eagle Ford and Bakken shales, creating a combined company with significant exposure to oil-weighted reserves. As of December 31, 2013, the combined company had total proved reserves of approximately 14.6 MMBoe and total proved PV-10 of $186 million, and for the quarter ended December 31, 2013, total net daily production of 2,750 Boepd.

  • Well Capitalized for Growth: Well positioned to pursue drill-bit growth and acquisitions with approximately $140 million of pro forma cash, an estimated $38 million that would be available under a pro forma senior secured revolving credit facility, and strong sponsorship from EnCap Investments L.P., Wells Fargo Energy Capital, Inc., BlackGold Capital Management LP, Vlasic Group, and additional investors with significant industry expertise.

  • Clean Balance Sheet: The combined company will have a clean capital structure currently consisting of only common equity and senior secured bank debt, and the critical mass to efficiently raise capital to pursue accretive growth projects.

Ray Singleton, President and CEO of Earthstone said, "The combination will allow Earthstone's stockholders to enjoy the benefits of a much larger company driven by a proven management team. Already on the road to success, Oak Valley is rapidly expanding its production and reserves. The combination enhances our access to capital, diversifies our asset base, strengthens our balance sheet and gives us scale. Our Bakken position gives the Oak Valley management team an opportunity to re-enter the Rockies with a Denver presence."

Frank A. Lodzinski, President and CEO of Oak Valley commented, "We believe the time is right for our team to re-enter the public arena and build another successful company. In a year and a half, we have established a production base, an Eagle Ford drilling program, and are now partnering with a fine company. We look forward to working with Earthstone to promptly complete this Transaction and advance our collective portfolio of projects. I strongly believe this Transaction provides our mutual owners with significant growth potential and is a path towards enhancing shareholder value."

Terms & Conditions
Earthstone will acquire three subsidiaries of Oak Valley with producing assets, undeveloped acreage, and approximately $138 million of cash, in exchange for approximately 9.1 million shares of common stock of Earthstone. The Transaction is expected to qualify as a tax free exchange under Section 351 of the Internal Revenue Code of 1986, as amended.

The board of directors of Earthstone and the board of managers of Oak Valley have unanimously approved the Agreement, which is subject to the approval of Earthstone stockholders, as well as other customary approvals, including an increase in the number of authorized shares of Earthstone common stock and authorization to list the newly issued shares on the NYSE MKT. The companies anticipate completing the Transaction in the third calendar quarter of 2014.

Concurrently with the execution of the Agreement, Ray Singleton, in his capacity as a stockholder of Earthstone, entered into a voting agreement with Oak Valley with respect to his shares of Earthstone common stock, which constitute approximately 26% of the total issued and outstanding shares of Earthstone common stock. Pursuant to the voting agreement, Mr. Singleton has agreed to vote his shares in favor of the Transaction, unless the Agreement is otherwise terminated in accordance with its terms.

SunTrust Robinson Humphrey, Inc. is acting as exclusive financial advisor to Earthstone in the Transaction. Legal counsel to Earthstone in the Transaction is Davis Graham & Stubbs LLP. Legal counsel to Oak Valley in the Transaction is Jones & Keller, P.C.

Investor Conference Call
A profile of the proposed Transaction has been posted to the web pages of Earthstone and Oak Valley (www.earthstoneenergy.com and www.oakvalleyllc.com). Earthstone and Oak Valley will host a joint conference call on May 21, 2014 to discuss the proposed Transaction at 11:00 a.m. EDT. Investors may participate in the conference call via telephone by dialing (877) 407-8035 for domestic callers or (201) 689-8035 for international callers, in both cases asking for the Earthstone / Oak Valley call a few minutes prior to the start time.

About Earthstone Energy, Inc.
Earthstone Energy, Inc. is a growth-oriented independent oil and gas exploration and production company with focus and growth primarily in the Williston Basin. Earthstone is traded on NYSE MKT under the symbol ESTE. Information on Earthstone can be found at its website: www.earthstoneenergy.com.

About Oak Valley Resources, LLC
Oak Valley Resources was capitalized on December 21, 2012 and is an independent oil and gas company engaged in the development and acquisition of oil and gas reserves through an active and diversified program that includes the acquisition, drilling and development of undeveloped leases, purchases of reserves and exploration activities, with the majority of its human and capital resources currently deployed towards its drilling program in Gonzales and Fayette Counties, Texas.

Forward-Looking Statements
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that are not strictly historical statements constitute forward-looking statements and may often, but not always, be identified by the use of such words such as "expects," "believes," "intends," "anticipates," "plans," "estimates," "potential," "possible," or "probable" or statements that certain actions, events or results "may," "will," "should," or "could" be taken, occur or be achieved. The forward-looking statements include statements about future operations, estimates of reserve and production volumes, expansion of production and reserves, future growth potential, the ability to raise future capital, and the anticipated timing for closing the proposed Transaction. Forward-looking statements are based on current expectations and assumptions and analyses made by Earthstone and Oak Valley in light of experience and perception of historical trends, current conditions and expected future developments, as well as other factors appropriate under the circumstances. However, whether actual results and developments will conform with expectations is subject to a number of risks and uncertainties, including but not limited to: the possibility that Earthstone may be unable to obtain stockholder approval or the companies may be unable to satisfy the other conditions to closing; that problems may arise in the integration of the businesses of the two companies; that the Transaction may involve unexpected costs; the risks of the oil and gas industry (for example, operational risks in exploring for, developing and producing crude oil and natural gas; risks and uncertainties involving geology of oil and gas deposits); the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to future production, costs and expenses; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; health, safety and environmental risks and risks related to weather; fluctuations in oil and gas prices; inability of management to execute its plans to meet its goals; shortages of drilling equipment, oil field personnel and services; unavailability of gathering systems, pipelines and processing facilities; and the possibility that government policies may change. Earthstone's annual report on Form 10-K for the year ended March 31, 2013, recent current reports on Form 8-K, and other Securities and Exchange Commission ("SEC") filings discuss some of the important risk factors identified that may affect its business, results of operations, and financial condition. Earthstone and Oak Valley undertake no obligation to revise or update publicly any forward-looking statements except as required by law.

Additional Information About the Proposed Transaction
In connection with the proposed Transaction, Earthstone will file with the SEC a proxy statement that will include important information about both Oak Valley and Earthstone. Earthstone also plans to file other relevant documents with the SEC regarding the proposed Transaction. INVESTORS AND SECURITY HOLDERS ARE URGED TO CAREFULLY READ THE PROXY STATEMENT AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT EARTHSTONE AND THE PROPOSED TRANSACTION. Investors and security holders may obtain these documents when available free of charge at the SEC's website at www.sec.gov. In addition, the documents filed with the SEC by Earthstone can be obtained free of charge from Earthstone's website at www.earthstoneenergy.com or by contacting the Company by mail at 633 Seventeenth Street, Suite 2320, Denver, Colorado 80202, or by telephone at (303) 296-3076.

Participants in Solicitation
Earthstone and its executive officers and directors may be deemed to be participants in the solicitation of proxies from the stockholders of Earthstone in respect of the proposed Transaction. Information regarding the persons who may, under the rules of the SEC, be considered participants in the solicitation of Earthstone's stockholders in connection with the proposed Transaction, including the interests of such persons in the proposed Transaction, will be set forth in Earthstone's definitive proxy statement when it is filed with the SEC. You can find information regarding Earthstone's directors and executive officers in Earthstone's definitive proxy statement for its 2013 annual meeting of stockholders, filed with the SEC on July 26, 2013.

This release shall not constitute an offer to sell or the solicitation of any offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

Contact:
Ray Singleton
Earthstone Energy, Inc.
President & CEO
(303) 296-3076

Neil Cohen
Oak Valley Resources, LLC
VP, Finance
(281) 298-4246

More Stories By Marketwired .

Copyright © 2009 Marketwired. All rights reserved. All the news releases provided by Marketwired are copyrighted. Any forms of copying other than an individual user's personal reference without express written permission is prohibited. Further distribution of these materials is strictly forbidden, including but not limited to, posting, emailing, faxing, archiving in a public database, redistributing via a computer network or in a printed form.

Latest Stories
Smart Cities are here to stay, but for their promise to be delivered, the data they produce must not be put in new siloes. In his session at @ThingsExpo, Mathias Herberts, Co-founder and CTO of Cityzen Data, discussed the best practices that will ensure a successful smart city journey.
In his session at 19th Cloud Expo, Claude Remillard, Principal Program Manager in Developer Division at Microsoft, contrasted how his team used config as code and immutable patterns for continuous delivery of microservices and apps to the cloud. He showed how the immutable patterns helps developers do away with most of the complexity of config as code-enabling scenarios such as rollback, zero downtime upgrades with far greater simplicity. He also demoed building immutable pipelines in the cloud ...
Traditional on-premises data centers have long been the domain of modern data platforms like Apache Hadoop, meaning companies who build their business on public cloud were challenged to run Big Data processing and analytics at scale. But recent advancements in Hadoop performance, security, and most importantly cloud-native integrations, are giving organizations the ability to truly gain value from all their data. In his session at 19th Cloud Expo, David Tishgart, Director of Product Marketing ...
Choosing the right cloud for your workloads is a balancing act that can cost your organization time, money and aggravation - unless you get it right the first time. Economics, speed, performance, accessibility, administrative needs and security all play a vital role in dictating your approach to the cloud. Without knowing the right questions to ask, you could wind up paying for capacity you'll never need or underestimating the resources required to run your applications.
Technology vendors and analysts are eager to paint a rosy picture of how wonderful IoT is and why your deployment will be great with the use of their products and services. While it is easy to showcase successful IoT solutions, identifying IoT systems that missed the mark or failed can often provide more in the way of key lessons learned. In his session at @ThingsExpo, Peter Vanderminden, Principal Industry Analyst for IoT & Digital Supply Chain to Flatiron Strategies, will focus on how IoT depl...
The pace of innovation, vendor lock-in, production sustainability, cost-effectiveness, and managing risk… In his session at 18th Cloud Expo, Dan Choquette, Founder of RackN, discussed how CIOs are challenged finding the balance of finding the right tools, technology and operational model that serves the business the best. He also discussed how clouds, open source software and infrastructure solutions have benefits but also drawbacks and how workload and operational portability between vendors an...
Adding public cloud resources to an existing application can be a daunting process. The tools that you currently use to manage the software and hardware outside the cloud aren’t always the best tools to efficiently grow into the cloud. All of the major configuration management tools have cloud orchestration plugins that can be leveraged, but there are also cloud-native tools that can dramatically improve the efficiency of managing your application lifecycle. In his session at 18th Cloud Expo, ...
With the proliferation of both SQL and NoSQL databases, organizations can now target specific fit-for-purpose database tools for their different application needs regarding scalability, ease of use, ACID support, etc. Platform as a Service offerings make this even easier now, enabling developers to roll out their own database infrastructure in minutes with minimal management overhead. However, this same amount of flexibility also comes with the challenges of picking the right tool, on the right ...
Big Data, cloud, analytics, contextual information, wearable tech, sensors, mobility, and WebRTC: together, these advances have created a perfect storm of technologies that are disrupting and transforming classic communications models and ecosystems. In his session at @ThingsExpo, Erik Perotti, Senior Manager of New Ventures on Plantronics’ Innovation team, provided an overview of this technological shift, including associated business and consumer communications impacts, and opportunities it m...
Manufacturers are embracing the Industrial Internet the same way consumers are leveraging Fitbits – to improve overall health and wellness. Both can provide consistent measurement, visibility, and suggest performance improvements customized to help reach goals. Fitbit users can view real-time data and make adjustments to increase their activity. In his session at @ThingsExpo, Mark Bernardo Professional Services Leader, Americas, at GE Digital, discussed how leveraging the Industrial Internet and...
"Tintri was started in 2008 with the express purpose of building a storage appliance that is ideal for virtualized environments. We support a lot of different hypervisor platforms from VMware to OpenStack to Hyper-V," explained Dan Florea, Director of Product Management at Tintri, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
There will be new vendors providing applications, middleware, and connected devices to support the thriving IoT ecosystem. This essentially means that electronic device manufacturers will also be in the software business. Many will be new to building embedded software or robust software. This creates an increased importance on software quality, particularly within the Industrial Internet of Things where business-critical applications are becoming dependent on products controlled by software. Qua...
Fact is, enterprises have significant legacy voice infrastructure that’s costly to replace with pure IP solutions. How can we bring this analog infrastructure into our shiny new cloud applications? There are proven methods to bind both legacy voice applications and traditional PSTN audio into cloud-based applications and services at a carrier scale. Some of the most successful implementations leverage WebRTC, WebSockets, SIP and other open source technologies. In his session at @ThingsExpo, Da...
The speed of software changes in growing and large scale rapid-paced DevOps environments presents a challenge for continuous testing. Many organizations struggle to get this right. Practices that work for small scale continuous testing may not be sufficient as the requirements grow. In his session at DevOps Summit, Marc Hornbeek, Sr. Solutions Architect of DevOps continuous test solutions at Spirent Communications, explained the best practices of continuous testing at high scale, which is rele...
A critical component of any IoT project is what to do with all the data being generated. This data needs to be captured, processed, structured, and stored in a way to facilitate different kinds of queries. Traditional data warehouse and analytical systems are mature technologies that can be used to handle certain kinds of queries, but they are not always well suited to many problems, particularly when there is a need for real-time insights.