Enduro Royalty Trust Announces Sponsor’s Entry Into Agreements to Sell Properties in the Permian Basin
Enduro Royalty Trust (NYSE: NDRO) (the “Trust”) today announced that
Enduro Resource Partners LLC (“Enduro”), the sponsor of the Trust, has
advised The Bank of New York Mellon Trust Company, N.A., as Trustee,
that Enduro has entered into eight separate purchase and sale agreements
to divest certain acreage and associated production in the Permian Basin
(the “Divestiture Properties”) that constitutes part of the properties
underlying the Trust and is therefore burdened by the Trust’s 80% net
profits interest. Because the Divestiture Properties are burdened by the
Trust’s 80% net profits interest, Enduro will seek, through a vote of
the Trust unitholders, a release of the Trust’s net profits interest in
the Divestiture Properties in exchange for the Trust unitholders
receiving 80% of the net proceeds of the sale of the Divestiture
Properties.
The total purchase price, subject to ordinary closing adjustments, is
$50.4 million, and includes Enduro’s working interest and assumes the
release of the net profits interest owned by the Trust. Enduro currently
anticipates that this could result in net proceeds to the Trust
unitholders of approximately $40 million, which is net of anticipated
expenses to be incurred in connection with the transactions. These
anticipated net proceeds are prior to an escrowed amount not to exceed
$750,000 to cover possible indemnification obligations under the
purchase and sale agreements (the escrowed amount will be released no
later than 25 months after the closing of the transactions).
The Divestiture Properties have the following characteristics:
-
The properties are non-operated.
-
The transactions are primarily comprised of 5,078 net undeveloped
acres across 8 counties in Texas and New Mexico and include minimal
production from which net profits allocable to the Trust, and
distributions to Trust unitholders, have been generated.
-
Of the 5,078 net undeveloped acres, 3,824 net acres are prospective
for development in the typical Permian Basin horizontal targets. Of
the remaining net acres, 985 net acres have no rights to the Delaware,
Bone Spring, and Wolfcamp zones, and 269 net acres are located where
drilling is prohibited due to potash mining operations.
-
Sales volumes related to the Divestiture Properties totaled 14,303
Bbls of oil (39 Bbls/D) and 137,932 Mcf of natural gas (377 Mcf/D) for
periods related to distributions paid in the year ended December 31,
2016. This amounts to 37,292 BOE (102 BOE/D) compared to 1,545,954 BOE
(4,224 BOE/D) for all the properties underlying the Trust; therefore,
the sales volumes represented approximately 2% of the sales volumes of
the properties underlying the Trust for such period.
-
Upside potential related to the Divestiture Properties is
capital-intensive and uncertain and is not reflected in the Trust
reserve report.
-
Total reserves for the Divestiture Properties from the December 31,
2016 SEC reserve report were 254 MBOE of the 10,151 MBOE reserves of
the properties underlying the Trust, or 2.5%.
-
Net profits allocable to the Trust from the Divestiture Properties
were only approximately $0.003 per unit for distributions paid during
2016, representing approximately 1% of the distributions for the year.
The sales transactions contemplate the release of the net profits
interest on the Divestiture Properties, which requires a special meeting
of Trust unitholders. At such meeting, Trust unitholders of record
holding at least 75% of the 33,000,000 outstanding Trust units must vote
in favor of the transaction to release the net profits interest. Enduro
actively marketed the Divestiture Properties and none of the purchasers
are affiliated with Enduro or its private equity sponsor.
A preliminary proxy statement will be filed with the SEC in the near
future regarding the proposed transactions and special meeting of
unitholders. Enduro currently owns 26% of the outstanding Trust units.
About Enduro Royalty Trust
Enduro Royalty Trust is a Delaware statutory trust formed by Enduro
Resource Partners to own a net profits interest representing the right
to receive 80% of the net profits from the sale of oil and natural gas
production from certain of Enduro Resource Partners’ properties in the
states of Texas, Louisiana and New Mexico. As described in the Trust’s
filings with the Securities and Exchange Commission, the amount of the
periodic distributions is expected to fluctuate, depending on the
proceeds received by the Trust as a result of actual production volumes,
oil and gas prices, the amount and timing of capital expenditures, and
the Trust’s administrative expenses, among other factors. Future
distributions are expected to be made on a monthly basis. For additional
information on the Trust, please visit www.enduroroyaltytrust.com.
Forward-Looking Statements and Cautionary Statements
This press release contains statements that are “forward-looking
statements” within the meaning of Section 21E of the Securities Exchange
Act of 1934, as amended. All statements contained in this press release,
other than statements of historical facts, are “forward-looking
statements” for purposes of these provisions. These forward-looking
statements include the amount of any anticipated distribution to
unitholders as a result of the proposed disposition of certain
properties and expected expenses, including capital expenditures. The
anticipated distribution is based, in large part, on the amount of cash
received or expected to be received by the Trust from Enduro Resource
Partners as a result of the sale of the underlying properties. Other
important factors that could cause actual results to differ materially
include expenses of the Trust and reserves for anticipated future
expenses. Statements made in this press release are qualified by the
cautionary statements made in this press release. Neither Enduro
Resource Partners nor the Trustee intends, and neither assumes any
obligation, to update any of the statements included in this press
release. An investment in units issued by Enduro Royalty Trust is
subject to the risks described in the Trust’s filings with the SEC,
including the risks described in the Trust’s Annual Report on Form 10-K
for the year ended December 31, 2016, filed with the SEC on March 15,
2017. The Trust’s quarterly and other filed reports are or will be
available over the Internet at the SEC’s website at http://www.sec.gov.
Additional Information and Where to Find It
This communication does not constitute a solicitation of any vote or
approval in respect of the proposed transactions as they affect the
Trust and the release of its net profits interest. In connection with
the proposed transactions, a meeting of the Trust’s unitholders will be
announced to seek unitholder approval. The Trust intends to file with
the SEC a proxy statement in connection with the proposed meeting of
unitholders. UNITHOLDERS ARE ADVISED TO READ THE DEFINITIVE PROXY
STATEMENT WHEN IT BECOMES AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE RELEASE OF THE TRUST’S NET PROFIT INTEREST WITH
RESPECT TO THE UNDERLYING PROPERTIES SUBJECT TO THE PROPOSED
TRANSACTIONS. The proxy statement and other relevant materials (when
they become available), and any other documents filed by the Trust with
the SEC, may be obtained at no cost at the SEC’s website at http://www.sec.gov,
at the Trust’s website at http://www.enduroroyaltytrust.com,
or by sending written request to the Trust at The Bank of New York
Mellon Trust Company, N.A., Trustee, 919 Congress Avenue, Suite 500,
Austin, Texas 78701.
Participants in the Solicitation
The Trust may be deemed to be a participant in soliciting proxies from
the Trust’s unitholders in connection with the proposed transaction and
the release of the Trust’s net profits interest with respect to the
underlying properties. Information regarding the Trust that may, under
the rules of the SEC, be considered to be a participant in any
solicitation in connection with the proposed transaction will be
contained in the proxy statement. Additional information can be obtained
in the Trust’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2016.
View source version on businesswire.com: http://www.businesswire.com/news/home/20170607005336/en/
Copyright Business Wire 2017
