We expect to receive net proceeds of approximately $ million from the sale
of our common stock, assuming an initial public offering price of $ per
share (the midpoint of the price range set forth on the cover page of this
prospectus) and after deducting estimated expenses payable by us and
underwriting discounts and commissions. An increase or decrease in the initial
public offering price of $1.00 per share of common stock would cause the net
proceeds that we will receive from this offering, after deducting estimated
expenses payable by us and underwriting discounts and commissions, to increase
or decrease by approximately $ million. We will not receive any of the
proceeds from the sale of shares of our common stock by the selling
stockholders. We will pay all expenses related to this offering, other than the
underwriting discount related to the shares sold by the selling stockholders.
We intend to use a portion of the net proceeds we receive from this offering to
repay the $18 million Chesapeake note plus accrued interest. We intend to use
the remainder of the net proceeds from this offering to fund a portion of our
capital expenditure budget of $380 million for the remainder of 2013 and 2014.
The capital expenditure budget includes approximately $108 million in 2013 and
$247 million in 2014 for drilling and developing our leasehold acreage and
approximately $14 million in 2013 and $11 million in 2014 for other capital
expenditures, including acquiring additional oil and natural gas leases,
extending the expiration of our current leasehold acreage and acquiring 3D
seismic data. We intend to fund the remainder of our capital expenditure budget
with cash on hand, cash flows from operations, a contingent payment we expect to
receive from a previously completed disposition of Eaglebine acreage, borrowings
under the anticipated term loan and proceeds from asset divestitures.
The following table sets forth the expected sources and uses of funds for
repayment of the Chesapeake note and our capital expenditure budget
from April 9, 2013 through December 31, 2014.
Sources of Funds ($ millions) Uses of Funds ($ millions)
Net proceeds from this offering $ Repayment of Chesapeake note
and interest (5) $ 19
Current cash and cash equivalents (1) 2013 drilling and completion
65 capital 108
Borrowings under the term loan (2) 2014 drilling and completion
48 capital 247
Contingent payment (3) 14 Other 2013 capital 14
Other potential sources (4) Other 2014 capital 11
Total sources of funds $ 399 Total uses of funds $ 399
(1) As of April 8, 2013.
(2) The term loan availability is subject to certain conditions, including
negotiation and execution of definitive documentation and achievement of
certain production levels.
(3) Expected payment of $14.6 million due in January 2014.
(4) Other sources include cash flow from operations, proceeds from potential
asset divestitures and/or additional debt.
(5) $18.0 million principal amount plus accrued interest
The ultimate amount of capital we will expend is largely discretionary, subject
to restrictions and maximum capital expenditures allowed under the terms of our
senior unsecured notes and the anticipated term loan, and may fluctuate
materially based on market conditions, the success of drilling operations,
access to capital and other factors. The terms of the agreement governing our
senior unsecured notes limits our capital expenditures to those provided for in
a plan of development approved by our lenders. Our lenders have approved the
first 10 wells and $90 million of our drilling capital budget for the period of
April 2013 to December 2013. Our remaining drilling capital budget for 2013 and
our drilling capital budget for 2014 reflect our management’s current
expectations but are subject to the approval of our lenders. Additionally, the
timing and costs of drilling on our non-operated Eaglebine leasehold acreage
generally will be within the control of the operator of the acreage.
The oil and natural gas industry is highly competitive in all phases. We
encounter competition from other oil and natural gas companies in all areas of
operation, from the acquisition of leasing options on oil and natural gas
properties to the exploration and development of those properties. Our
competitors include major integrated oil and natural gas companies, numerous
independent oil and natural gas companies, individuals and drilling and income
programs. Many of our competitors are large, well established companies that
have substantially larger operating staffs and greater capital resources than we
do. Such companies may be able to pay more for lease options on oil and natural
gas properties and exploratory locations and to define, evaluate, bid for and
purchase a greater number of properties and locations than our financial or
human resources permit. Our ability to acquire additional properties and to
discover reserves in the future will depend upon our ability to evaluate and
select suitable properties and to consummate transactions in a highly
competitive environment.
Company Description
We are an independent exploration and production company focused on the
acquisition, exploration, development and exploitation of unconventional oil and
natural gas resources. We own approximately 103,600 net acres in three basins:
the Woodbine Sandstone and Eagle Ford Shale formations in East
Texas, which we
refer to as the Eaglebine; the Wolfcamp play in the Permian Basin in West Texas,
which we refer to as the Wolfcamp; and the Niobrara Shale in the
Denver-Julesburg Basin in Colorado and Wyoming, which we refer to as the
Niobrara. We target liquids-rich resource plays and have built our leasehold
acreage position through direct acquisitions from mineral owners and larger
aggregated acquisitions. Our management team has extensive engineering,
geological, geophysical and technical expertise in our operating areas.
Our primary area of focus is the Eaglebine, in which we own approximately 72,352
net acres. We acquired the largest portion of this Eaglebine acreage, 57,275 net
acres, from a subsidiary of Chesapeake Energy Corporation, or Chesapeake, and
certain co-owners in April 2013 for approximately $93 million. We refer to this
transaction as the Chesapeake acquisition. We are the operator on approximately
58,201 of our net acres in the Eaglebine. In addition to our acreage in the
Eaglebine, we have approximately 14,316 net acres in our Wolfcamp area, where we
have 100% operated working interests, and 16,932 net acres in our Niobrara area,
where we generally have 100% operated working interests.
The majority of our capital expenditure budget for the period from April 2013 to
December 2014 will be focused on the development of our operated acreage in the
Eaglebine. The following table presents summary data for our acreage in the
Eaglebine and our other operating areas as of April 8, 2013 (the date of closing
of the Chesapeake acquisition) and our drilling capital budget of $108 million
for the period from April 9, 2013 to December 31, 2013 and $247 million for the
year ending December 31, 2014. We also have budgeted estimated capital
expenditures of $14 million for the period from April 9, 2013 to December 31,
2013 and $11 million for the year ending December 31, 2014 for land acquisition,
leasehold extension, seismic and other capital needs.
----------
Our company was formed as Energy & Exploration Partners, LLC in 2006 and began
operations in 2008. In late 2009, we began leasing in the Eagle Ford Shale
trend, primarily in McMullen and LaSalle Counties, Texas, where we leased and
ultimately sold over 125,000 acres to major and independent oil and natural gas
companies, including Murphy Oil Corporation and Comstock Resources, Inc. In
early 2011, we began accumulating leasehold acreage in our current operating
areas.
Energy & Exploration Partners, Inc. was incorporated on July 31, 2012 pursuant
to the laws of the State of Delaware to become a holding company for our
business. In August 2012, we completed a series of reorganization transactions,
which we refer to collectively as our corporate reorganization.
Our principal executive offices are located at Two City Place, Suite 1700, 100
Throckmorton, Fort Worth, Texas 76102, and our telephone number at that address
is (817) 789-6712. Our website address is www.enexp.com.