Alta Mesa Partners | Russell T. Rudy Energy LLC
The dramatic and sustained collapse of oil prices is exacting an especially heavy toll on smaller exploration and production companies. As hedge contracts, which locked in higher prices, expire cash become harder to come by. One way to generate cash is through asset sales. Another is through reserve-based lines of credit. This involves the operator pledging reserves as collateral. However, twice a year the banks re-determine the value of the borrower’s reserves. Falling prices present a double whammy for the borrower as both the value, and the volume, of reserves are reduced (please go to https://rudyenergy.com/proved-reserves-how-effective-a-yardstick/ for a discussion of how price impacts calculation of reserve volumes).
A recent article in “Rigzone” cites Alta Mesa Holdings LP as an example of the bleak options confronting some operators. Last week the company sold off producing assets in the Eagle Ford shale of South Texas to EnerVest Ltd. for $125 million. Alta Mesa had already sold Eagle Ford assets to Memorial Production Operating LLC in 2014, as well as additional properties in the play to ReOil Eagle I for $210 million.
Alta Mesa also has a $300 million senior revolving line of credit. To help pay down the balance under this arrangement Alta Mesa borrowed an additional $125 from Morgan Stanley Energy Capital Inc.
Through asset sales and additional debt to pay off older loans, Alta Mesa is buying tims to stay afloat in hopes that better times lie ahead.
To read the article in its entirety, please go to http://www.rigzone.com/news/article_pf.asp?a_id=140767.
