Atlas Resource, EP Energy in a Deal - Analyst Blog

By Zacks | June 13, 2013 AAA

Atlas Resource Partners LP (ARP), a master limited partnership, declared that it has inked a deal with EP Energy E&P Company LP.

Per the contract, Atlas Resource will buy roughly 466 billion cubic feet (Bcf) of natural gas proved reserves from EP Energy for a total consideration of $733 million. The assets are located at the Raton and Black Warrior basins. The transaction is expected to close by the third quarter of 2013.

Atlas Resource, which is engaged in energy exploration and production activities, added that this acquisition is expected to boost the distributable cash flow by roughly 27% – from the current annualized payout of $2.04 per unit to $2.60 per unit in 2014.

Management reveals that out of the total 466 Bcf of natural gas reserves acquired, 93% are established to be proved. The properties are now generating roughly 119 million cubic feet (MMcf) of natural gas per day, which is almost twice of Atlas Resource’s net daily production by May 2013.

Atlas Resource, which is an affiliate of Atlas Energy LP (ATLS), will sponsor part of its acquisition cost by issuing Class C convertible preferred unit worth $125 million, which will be taken by its parent.

Pittsburgh, Pa.-based Atlas Resource is a producer of natural gas, crude oil and natural gas liquids in the U.S.

Atlas Resource currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next 1 to 3 months.

Two oil and exploration and production firms that are expected to outperform the broader U.S. equity market over the next 1 to 3 months are Anadarko Petroleum Corporation (APC) and Encana Corporation (ECA). Both the firms sport a Zacks Rank #2 (Buy).

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