RBC Capital Markets, LLC acted as financial advisor to Earthstone in connection with the Sabalo Acquisition. Stephens Inc. acted as independent financial advisor and provided a fairness opinion to the Special Committee. Jefferies LLC acted as Earthstone’s sole placement agent in connection with the Preferred Stock. Jefferies LLC acted as sole financial advisor to Sabalo. Legal advisors included Jones & Keller, P.C. for Earthstone, Richards, Layton & Finger, P.A. for the Special Committee and Bracewell LLP for Sabalo.
Earthstone Energy, Inc. (NYSE: ESTE) has entered into an agreement (the “Agreement”) with Sabalo Holdings, LLC, whereby Earthstone will acquire all of Sabalo Holdings’ interests in Sabalo Energy, LLC and Sabalo Energy, Inc., whose assets include both producing and non-producing oil and gas assets in the northern Midland Basin. In addition, on October 17, 2018, Sabalo entered into an agreement to acquire certain well-bore interests held by Shad Permian, LLC, which were part of a drilling joint venture between Sabalo and Shad. As a result of these agreements, Earthstone expects to acquire 20,800 net acres located in the Midland Basin and an estimated 488 gross operated horizontal drilling locations and 349 gross non-operated horizontal drilling locations for an aggregate purchase price of approximately $950 million which consists of $650 million in cash and $300 million in stock at approximately $9.28 per share comprised of 32,315,695 shares of Earthstone Class B common stock and corresponding membership interests of Earthstone Energy Holdings, LLC. The purchase price is subject to certain customary adjustments, including an increase in the purchase price of approximately $26 million to account for approximately 1,330 acres acquired after the effective date of the Sabalo Acquisition (and included in the net acres mentioned herein). All purchase price adjustments will be paid in cash. Sabalo’s and Shad’s combined average estimated production for the month of September 2018 was approximately 11,200 Boe/d with approximately 83% being oil. Sabalo is a privately-held oil and gas company based in Corpus Christi, Texas and is a portfolio company of EnCap Investments L.P. The Sabalo Acquisition represents a large, contiguous acreage position with a deep inventory of favorable economic drilling locations and significantly expands Earthstone’s footprint in the Midland Basin. The Sabalo Acquisition is expected to close in late 2018 or in the first quarter of 2019, subject to the satisfaction of customary closing conditions, including the approval of Earthstone’s stockholders.
Jones & Keller advised Earthstone Energy, Inc. with a team led by Reid A. Godbolt and Adam J. Fogoros.
Bracewell advised with a team including W. James McAnelly III (Picture), Troy L. Harder, Elizabeth L. McGinley, Lance W. Behnke, Charles H. Still Jr., Austin T. Lee, Daniel E. Hemli, Scott C. Sanders, Steven J. Lorch, Jacqueline R. Java, Hobie Temple, Kate B. McGregor, Molly E. Butkus, Shannon M. Rice, David Bartz, Catherine B. Engell and William A. Moss.
Involved fees earner: Reid Godbolt – Jones & Keller; Adam Fogoros – Jones & Keller; James McAnelly – Bracewell; Troy Harder – Bracewell; Charles Still – Bracewell; Austin Lee – Bracewell; Hobie Temple – Bracewell; Kate Barrington McGregor – Bracewell; Molly Butkus – Bracewell; Shannon Rice – Bracewell; David Bartz – Bracewell; Elizabeth McGinley – Bracewell; Lance Behnke – Bracewell; Steven Lorch – Bracewell; Catherine Engell – Bracewell; Daniel Hemli – Bracewell; Jacqueline Java – Bracewell; Scott Sanders – Bracewell; William Moss – Bracewell;