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2 Colo. producers merging in $649M deal to form DJ Basin-focused E&P company

The oil and gas exploration and production company Bill Barrett Corp. agreed to a merger with fellow Denver-based producer Fifth Creek Energy Co. LLC in a deal valued at about $649 million.

The transaction value includes the assumption of up to $54 million of debt. The merger would result in a combined company exclusively focused on oil-weighted rural areas in the DJ Basin, with an acreage position of about 151,100 net acres and an inventory of 2,865 future drilling locations, according to a Dec. 5 news release. Average daily production for the assets were about 24,000 barrels of oil equivalent per day in the third quarter of 2017, with combined proved reserves of 168 MMBoe as of Dec. 31, 2016.

In particular, the combined company would have about 81,000 net acres and approximately 2,900 Boe/d, 72% oil, of production in the Hereford Field in Weld County, Colo., whose drilling results are among the highest rate oil wells ever drilled in the DJ Basin. Plans for 2018 include operating three drilling rigs to produce an estimated 11 MMBoe to 12 MMBoe, 65% oil, with CapEx of $500 million to $600 million.

"[The deal] presents us with a unique opportunity to add a large, undeveloped acreage position at an attractive cost with the potential for decades of high-return drilling locations located in a rural area that is highly complementary to our legacy position," said Scot Woodall, president and CEO of Bill Barrett.

Under the deal, Bill Barrett and Fifth Creek would become subsidiaries of a new holding company. Bill Barrett common stock would be exchanged for the new holding company's common stock on a 1-for-1 basis, while Fifth Creek's owner, the private equity firm NGP Energy Capital Management LLC, would receive 100 million of the new holding company's shares.

Upon deal completion, Woodall will become president and CEO of the combined company, whose board of directors would be composed of six members from Bill Barrett's current board and five members to be chosen by Fifth Creek. Bill Barrett's board chairman, Jim Mogg, will retain his role in the combined company's board.

Concurrently, Bill Barrett struck an agreement with an undisclosed holder of its 7% senior notes due 2022 to exchange $50 million of the notes for newly issued shares of common stock plus the cash payment of accrued and unpaid interest. The bonds would be valued at 102% of par.

The deal is scheduled to close early in the first half of 2018. Tudor Pickering Holt & Co. acted as financial adviser and Wachtell Lipton Rosen & Katz acted as legal adviser to Bill Barrett. Credit Suisse served as Fifth Creek's financial adviser, and Vinson & Elkins LLP served as its legal adviser.