Boston, MA 05/19/2014 (wallstreetpr) – Earthstone Energy Inc (NYSEMKT:ESTE), the Denver-based oil producer announced last week that it has entered into an exchange agreement to acquire the “producing assets, undeveloped acreage along with $138 million cash” of Houston based Oak Valley Resources LLC, in exchange of nearly 9.1 million shares of the common stock of the company.
Headquarters In Houston
Oak Valley has majority of its assets in the Eagle Ford shale in South Texas and the newly merged entity will function through its headquarters in Houston, while it will also maintain Denver office. The specified cash involved in the transaction includes the current cash in hand for Oak Valley as well as $107 million of commitments accruing to the company. Post completion of the deal, which is still subject to shareholders’ approval, will allow Oak valley’s President and CEO Frank A. Lodzinski to retain his title under the new combined company. Additionally, Lodzinski would also act as Director of the new company.At the same time, Earthstone Energy Inc (NYSEMKT:ESTE)’s former president and CEO, Ray Singleton, will assume the role of a senior executive and director in the combined company.
Tax-Free Exchange
According to the definitive agreement, Earthstone will takeover Oak Valley’s three subsidiaries and the transaction is set to be eligible as a tax free exchange in accordance with the provisions fo Section 351 of the Internal Revenue Code of 1986. The board of directors of the two companies had unanimously approved the transaction, which remains to be passed by the Earthstone’ shareholders and other customary approvals. The two companies expect the agreement to reach its completion in the third quarter of the year. On completion of the transaction, Earthstone Energy Inc (NYSEMKT:ESTE)’s shareholders will have nearly 10.9 million shares of the company outstanding with the present stockholders owing nearly 16% of the merged entity. While, Oak Valley Resources will get 84% holding in Earthstone Energy.
