Stone Energy Corporation (NYSE: SGY) (“Stone” or the “Company”) today announced the results of the auction for the sale of all of its approximately 86,000 net acres in the Appalachia regions of Pennsylvania and West Virginia (collectively, the “Properties”), including approximately 53,000 core net Marcellus acres and drilling rights on approximately 44,000 net acres in the Utica, to EQT Corporation, through its wholly-owned subsidiary EQT Production Company (“EQT”), for a sales price of $527 million, subject to the purchase price adjustments described below and approval by the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”).
As previously disclosed, on October 20, 2016, the Company entered into a purchase and sale agreement (as amended on December 9, 2016, the “PSA”) with TH Exploration III, LLC, an affiliate of Tug Hill, Inc. (“Tug Hill”). Pursuant to the terms of the PSA, Stone agreed to sell the Properties to Tug Hill for $360 million in cash, subject to customary purchase price adjustments. Stone entered into the PSA in conjunction with previously announced comprehensive balance sheet restructuring efforts that include the execution of a restructuring support agreement, as amended, (the “A&R RSA”), to support a restructuring on the terms of a pre-packaged plan of reorganization as described therein (the “Plan”).
On December 14, 2016, Stone and its domestic subsidiaries (the “Debtors”) filed voluntary petitions under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the Bankruptcy Court. Pursuant to Bankruptcy Court orders dated January 11, 2017 and January 31, 2017, two additional bidders were allowed to participate in competitive bidding on the Properties, with the Tug Hill PSA bid serving as the stalking horse bid. On January 18, 2017, the Bankruptcy Court approved certain bidding procedures (the “Bidding Procedures”) in connection with the sale of the Properties. In accordance with the Bidding Procedures, on February 8, 2017, Stone conducted an auction for the sale of the Properties and upon conclusion selected the final bid submitted by EQT, with a final purchase price of $527 million, subject to customary purchase price adjustments, with an upward adjustment to the purchase price of up to $16 million in an amount equal to certain downward adjustments (the “Purchase Price”), as the prevailing bid (the “Prevailing Purchaser”). A portion of the Purchase Price will be used to pay the break-up fee and expense reimbursement in the PSA. Further, in accordance with the Bidding Procedures, American Petroleum Partners Operating, LLC, who submitted a bid including a final purchase price of $526 million and otherwise on the same terms as the bid of the Prevailing Purchaser, was selected as the back-up bidder (the “Back-up Bidder”). The terms of the prevailing bid will be filed as an exhibit to a Current Report on Form 8-K that the Company expects to file in connection with the Sale Hearing, discussed below.
The hearing to consider approval of the sale of the Properties to the Prevailing Purchaser will be held on February 10, 2017 at 9:00 a.m. CST (the “Sale Hearing”) in the Bankruptcy Court. The Company expects to close the sale of the Properties by February 28, 2017, subject to customary closing conditions and approval by the Bankruptcy Court.
Chairman, President and Chief Executive Officer David H. Welch stated, “With the successful conclusion of the auction, we are now poised to move forward with our pre-packaged Plan, with Stone, its noteholders and the bank group all in agreement on a plan of action. This should allow Stone to emerge as a much stronger, healthier company with significant debt reduction, a solid balance sheet, and a focused portfolio of deep water producing assets and near-term drilling opportunities.
I would like to acknowledge the enormous efforts of the Stone employees, our Board of Directors, and, in particular, the exemplary service of our board member David Lawrence, who agreed to serve as the Special Liaison of the Independent Directors during the months prior to filing. Dr. Lawrence is widely recognized for his industry leadership and extensive global experience across the energy business. His contributions have been invaluable.”
Lead Director, Richard Pattarozzi, echoed Welch’s comments and went on to say, “The Board would like to express its thanks to David Lawrence for having taken on this task in a challenging environment and is grateful for his consistent delivery of excellent guidance and sage advice throughout this process.”
Latham & Watkins LLP is acting as lead counsel to the Debtors in connection with the sale of the Properties and the bankruptcy proceedings. Porter Hedges LLP is acting as the Debtors’ bankruptcy co-counsel. Tudor, Pickering, Holt & Co. is acting as the Debtors’ investment banker in connection with the sale of the Properties. Lazard is acting as the Debtors’ investment banker in connection with the bankruptcy proceedings. Alvarez & Marsal North America, LLC is acting as the Debtors’ restructuring advisors. Andrews Kurth Kenyon LLP is acting as counsel to the independent directors of the board. Kirkland & Ellis LLP is acting as legal counsel to EQT in connection with the acquisition of the Properties.