UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report: June 21, 2016
(Date of earliest event reported)
QEP RESOURCES, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 001-34778 | 87-0287750 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification Number) |
1050 17th Street, Suite 800
Denver, Colorado 80265
(Address of principal executive offices and zip code)
(303) 672-6900
(Registrant’s telephone number, including area code)
Not Applicable
(Former Name or Former Address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 1.01 | Entry into a Material Definitive Agreement |
Purchase Agreement
On June 21, 2016, QEP Resources, Inc. (the “Registrant”), through its wholly-owned subsidiary, QEP Energy Company, entered into a definitive purchase and sale agreement (the “Purchase Agreement”) with certain individuals and entities (the “Initial Sellers”) to acquire oil and gas properties in the Permian Basin in Martin County, Texas (the “Acquisition”) from the Initial Sellers and approximately 74 other associated individuals and entities (the “Associated Owners” and, together with the Initial Sellers, the “Sellers”). The Purchase Agreement provides that the Initial Sellers have until July 13, 2016 (the “Election Deadline”), to obtain executed joinders to the Purchase Agreement from the Associated Owners. The oil and gas properties to be acquired from the Initial Sellers and Associated Owners (collectively, the “Assets”) contain approximately 9,400 net acres in Martin County, Texas. Collectively, the Assets owned by the Initial Sellers constitute approximately 82% of the total value of the Assets, based on the Registrant’s allocation of value among the Assets.
The preliminary purchase price for the Assets is approximately $600 million (the “Preliminary Purchase Price”). In addition to customary purchase price adjustments, the Preliminary Purchase Price shall be reduced by the allocated value of any Assets owned by Associated Owners that fail to execute a joinder to the Purchase Agreement (collectively, the “Non-Participating Associated Owners”) prior to the Election Deadline, with such Assets owned by the Non-Participating Associated Owners (the “Non-Assets”) to be excluded from the transactions contemplated by the Purchase Agreement. The Purchase Agreement may be terminated by the Registrant, at its sole option, if the aggregate allocated value of all Non-Assets exceeds 10% of the Preliminary Purchase Price.
The Acquisition has an effective date of April 1, 2016. In connection with the execution of the Purchase Agreement, the Registrant paid a deposit equal to approximately 5% of the Preliminary Purchase Price to an escrow agent. The Registrant expects to close the Acquisition on or before September 30, 2016, subject to title and environmental due diligence and the satisfaction of customary closing conditions.
Following the Registrant’s due diligence, if the aggregate dollar value of any (i) title and environmental defects, plus (ii) any casualty loss amounts, plus (iii) the value of any Assets excluded due to the exercise of preferential purchase rights or unobtained hard consents, plus (iv) the aggregate value of any Assets excluded from the transaction as a result of the Registrant terminating the Purchase Agreement as to any applicable Sellers failing to satisfy the Registrant’s closing conditions exceeds 10% of the Preliminary Purchase Price (as reduced to account for the exclusion of the Non-Assets), then the Registrant retains the right to terminate the Purchase Agreement. If the aggregate dollar value of items (i) through (iii) above exceeds 10% of the Preliminary Purchase Price (as reduced to account for the exclusion of the Non-Assets), then the Sellers retain the right to terminate the Purchase Agreement.
Each party’s separate obligation to consummate the respective portions of the Acquisition is conditioned upon, among other things, (i) confirmation that the counterparties’ representations and warranties are true in all material respects as of the closing, (ii) the counterparties’ performance, in all material respects, of all covenants, (iii) the receipt of all required approvals, (iv) the absence of legal matters prohibiting the Acquisition and (v) the purchase price condition described above.
In addition, the Purchase Agreement contains customary representations, warranties and covenants.
| Item 7.01 | Regulation FD Disclosure |
On June 21, 2016, the Registrant issued a press release announcing the Acquisition. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
The information in Item 7.01 of this Current Report on Form 8-K, including the attached Exhibit 99.1, is being “furnished” pursuant to Item 7.01 and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, and is not incorporated by reference into any filing, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
2
This Current Report on Form 8-K includes forward-looking statements within the meaning of Section 27(a) of the Securities Act of 1933, as amended, and Section 21(e) of the Securities Exchange Act of 1934, as amended. Forward-looking statements can be identified by words such as “anticipates,” “believes,” “forecasts,” “plans,” “estimates,” “expects,” “intends,” “should,” “will” or other similar expressions. Such statements are based on management’s current expectations, estimates and projections, which are subject to a wide range of uncertainties and business risks. These forward-looking statements include, but are not limited to, statements regarding the anticipated closing date of the Acquisition. Actual results may differ materially from those included in the forward-looking statements due to a number of factors, including, but not limited to: disruptions of the Registrant’s ongoing business, distraction of management and employees, increased expenses and adversely affected results of operations from organizational modifications due to the Acquisition; the inability of the parties to satisfy the conditions to the consummation of the Acquisition; the risk that expected efficiencies from the transaction may not be fully realized; changes in natural gas, natural gas liquid (“NGL”) and oil prices; liquidity constraints, including those resulting from the cost or unavailability of financing due to debt and equity capital and credit market conditions, changes in our credit rating, our compliance with loan covenants, the increasing credit pressure on our industry or demands for cash collateral by counterparties to derivative and other contracts; global geopolitical and macroeconomic factors; general economic conditions, including interest rates; changes in local, regional, national and global demand for natural gas, oil and NGL; changes in, adoption of and compliance with laws and regulations, including decisions and policies concerning the environment, climate change, greenhouse gas or other emissions, natural resources, and fish and wildlife, hydraulic fracturing, water use and drilling and completion techniques, as well as the risk of legal proceedings arising from such matters, whether involving public or private claimants or regulatory investigative or enforcement measures; impact of U.S. dollar exchange rates on oil, NGL and natural gas prices; elimination of federal income tax deductions for oil and gas exploration and development; drilling results; shortages of oilfield equipment, services and personnel; the availability of storage and refining capacity; operating risks such as unexpected drilling conditions; transportation constraints; weather conditions; changes in maintenance, service and construction costs; permitting delays; outcome of contingencies such as legal proceedings; inadequate supplies of water and/or lack of water disposal sources; and the other risks discussed in the Registrant’s periodic filings with the Securities and Exchange Commission, including the Risk Factors section of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015, and Quarterly Report on Form 10-Q for the quarter ended March 31, 2016. The Registrant undertakes no obligation to publicly correct or update the forward-looking statements to reflect future events or circumstances.
| Item 9.01 | Financial Statements and Exhibits |
(d) Exhibits.
| Exhibit |
Description | |
| 99.1 | Press Release of QEP Resources, Inc. dated June 21, 2016. | |
3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Dated: June 21, 2016 | QEP RESOURCES, INC. | |||||
| /s/ Richard J. Doleshek | ||||||
| Richard J. Doleshek | ||||||
| Executive Vice President and Chief Financial Officer | ||||||
4
EXHIBIT INDEX
| Exhibit |
Description | |
| 99.1 | Press Release of QEP Resources, Inc. dated June 21, 2016. | |
5
Exhibit 99.1
News Release
QEP Resources, Inc. to Acquire Additional Oil Properties in Core of Permian Basin
| • | Adds over 430 potential horizontal drilling locations across four target horizons |
| • | Increases QEP Permian potential drilling locations by over 50% |
| • | Leverages proximity of existing QEP Permian acreage for operational and technical efficiencies |
DENVER — June 21, 2016 – QEP Resources, Inc. (NYSE: QEP) (“QEP” or the “Company”) announced today that its wholly owned subsidiary, QEP Energy Company, has entered into a definitive agreement (the “Agreement”) with certain individuals and entities (the “Initial Sellers”) to acquire oil and gas properties in the Permian Basin from the Initial Sellers and other associated individuals and entities (the “Associated Owners”) for an aggregate purchase price of approximately $600 million, subject to customary purchase price adjustments (the “Acquisition”). The Acquisition properties, which are located in Martin County, TX, will further broaden the Company’s exploration and production footprint in the core of the northern Midland Basin. The Acquisition advances QEP’s strategy of acquiring, developing and producing oil and gas from resource plays in its core operating areas and expanding into areas where it can capitalize on its operating and technical expertise.
The Agreement provides that the Initial Sellers have until July 13, 2016 (the “Election Deadline”), to obtain executed joinders to the Agreement from the Associated Owners. In addition to customary purchase price adjustments, the $600 million purchase price shall be reduced by the allocated value of any assets owned by Associated Owners that fail to execute a joinder of the Agreement (collectively, the “Non-Participating Associated Owners”) prior to the Election Deadline. The Agreement may be terminated by QEP, at its sole option, if the aggregate allocated value of all assets owned by Non-Participating Associated Owners exceeds 10% of the $600 million purchase price.
Acquisition Highlights:
| • | 10 miles east of existing QEP operations |
| • | Approximately 9,400 net acres in Martin County, TX |
| • | 98% of acreage is held by production to base of Wolfcamp Formation or deeper |
| • | 96% average working interest subject to a 23% royalty burden |
| • | Current net production of approximately 1,400 barrels of oil equivalent per day (Boed), of which approximately 83% is crude oil, from 96 vertical wells |
| • | Potential for over 430 horizontal drilling locations over four horizons – Wolfcamp A, Wolfcamp B, Middle Spraberry and Spraberry Shale – with additional potential in deeper and shallower horizons |
| • | Net proved reserves, based on internal estimates, of approximately 76 million barrels of oil equivalent (MMBoe) |
| • | Total net recoverable resources, based on internal estimates, of approximately 275 MMBoe |
“The Acquisition adds significant drilling inventory in the core of the northern Midland Basin and broadens our footprint in a world-class crude oil basin,” commented Chuck Stanley, Chairman, President and CEO of QEP. “We believe this Acquisition, combined with our existing crude oil assets, will enhance our crude oil production growth and improve our operating efficiency.”
The transaction is expected to close in September 2016, subject to customary closing conditions, with an effective
date of April 1, 2016.
About QEP Resources
QEP Resources, Inc. (NYSE: QEP) is an independent natural gas and crude oil exploration and production company focused in two geographic regions: the Northern Region (primarily Wyoming, North Dakota and Utah) and the Southern Region (primarily Texas and Louisiana) of the United States.
Forward-Looking Statements
This release includes forward-looking statements within the meaning of Section 27(a) of the Securities Act of 1933, as amended, and Section 21(e) of the Securities Exchange Act of 1934, as amended. Forward-looking statements can be identified by words such as “anticipates,” “believes,” “forecasts,” “plans,” “estimates,” “expects,” “should,” “will” or other similar expressions. Such statements are based on management’s current expectations, estimates and projections, which are subject to a wide range of uncertainties and business risks. These forward-looking statements include, but are not limited to, statements regarding: benefits of the Acquisition; potential drilling locations; estimated proved reserves and net recoverable resources to be acquired; quality of the Acquisition assets; impact on QEP’s production growth and operating efficiency; and timing of the closing of the Acquisition. Actual results may differ materially from those included in the forward-looking statements due to a number of factors, including, but not limited to: disruptions of QEP’s ongoing business, distraction of management and employees, increased expenses and adversely affected results of operations from organizational modifications due to the Acquisition; the inability of the parties to satisfy the conditions to the consummation of the Acquisition; the risk that expected efficiencies from the transaction may not be fully realized; changes in natural gas, NGL and oil prices; liquidity constraints, including those resulting from the cost or unavailability of financing due to debt and equity capital and credit market conditions, changes in our credit rating, our compliance with loan covenants, the increasing credit pressure on our industry or demands for cash collateral by counterparties to derivative and other contracts; global geopolitical and macroeconomic factors; general economic conditions, including interest rates; changes in local, regional, national and global demand for natural gas, oil and NGL; changes in, adoption of and compliance with laws and regulations, including decisions and policies concerning the environment, climate change, greenhouse gas or other emissions, natural resources, and fish and wildlife, hydraulic fracturing, water use and drilling and completion techniques, as well as the risk of legal proceedings arising from such matters, whether involving public or private claimants or regulatory investigative or enforcement measures; impact of U.S. dollar exchange rates on oil, NGL and natural gas prices; elimination of federal income tax deductions for oil and gas exploration and development; drilling results; shortages of oilfield equipment, services and personnel; the availability of storage and refining capacity; operating risks such as unexpected drilling conditions; transportation constraints; weather conditions; changes in maintenance, service and construction costs; permitting delays; outcome of contingencies such as legal proceedings; inadequate supplies of water and/or lack of water disposal sources; and the other risks discussed in the Company’s periodic filings with the Securities and Exchange Commission (SEC), including the Risk Factors section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, and Quarterly Report on Form 10-Q for the quarter ended March 31, 2016. QEP Resources undertakes no obligation to publicly correct or update the forward-looking statements in this news release, in other documents, or on the website to reflect future events or circumstances. All such statements are expressly qualified by this cautionary statement.
Estimated Net Recoverable Resources.
“Estimated net recoverable resources” refers to the Company’s internal estimates of hydrocarbon quantities that may be potentially discovered through exploratory drilling or recovered with additional drilling or recovery techniques and are not proved, probable or possible reserves within the meaning of the rules of the SEC. Estimates of net recoverable resources are by their nature more speculative than estimates of proved reserves and, accordingly, are subject to substantially more risks of actually being realized. Actual quantities that may be ultimately recovered from the Company’s interests may differ substantially. Factors affecting ultimate recovery include the scope of the Company’s ongoing drilling program, which will be directly affected by the availability of capital; oil, gas and NGL prices; drilling and production costs; availability of drilling services and equipment; actual drilling results; geological and mechanical factors affecting recovery rates; lease expirations; transportation constraints; changes in, adoption of and compliance with laws and regulations; regulatory approvals; and other factors.
Contact
Investors:
William Kent
303-405-6665
Media:
Brent Rockwood
303-672-6999