공고 • Sep 02
Ring Energy, Inc. (NYSEAM:REI) acquired Assets of Stronghold Energy II Operating, LLC and Stronghold Energy II Royalties, LP.
Ring Energy, Inc. (NYSE: REI) entered into a purchase and sale agreement to acquire Assets of Stronghold Energy II Operating, LLC and Stronghold Energy II Royalties, LP on July 1, 2022. Pursuant to the Purchase Agreement, Ring will acquire interests in oil and gas leases and related property of Stronghold located in the Central Basin Platform of Texas, for a purchase price of approximately $465 million, of which $215 million will be in cash and the remainder will be in the form of stock consideration consisting of either (i) 63,888,889 shares of Ring common stock if stockholder approval of the issuance is obtained prior to closing of the Stronghold acquisition or (ii) in the event that the pre-closing stockholder approval is not obtained, 21,339,986 shares of Ring common stock and 153,176 shares of newly created Series A convertible preferred stock, par value $0.001 that will be automatically converted to common stock upon stockholder approval of the conversion into approximately 42.5 million shares of common stock at the equivalent price of $3.60 per common share. The purchase price is subject to customary purchase price adjustments with an effective date of June 1, 2022. On July 5, 2022, in connection with the purchase agreement, Ring deposited $46,500,000 in cash into a third-party escrow account as a deposit pursuant to the purchase agreement, which will be credited against the purchase price upon closing of the Stronghold acquisition. At the closing of the Stronghold acquisition, (i) $8,250,000 of cash and (ii) either (a) 6,458,333 shares of Ring common stock if pre-closing stockholder approval is received or (b) 23,249 shares of preferred stock if pre-closing stockholder approval is not received, will be deposited (or retained in the case of the cash portion) in an escrow account to satisfy potential indemnity obligations of Stronghold. Ring Energy will also pay $20.0 million of existing Stronghold hedge liability. The cash portion of the consideration will be funded primarily from borrowings under a fully committed revolving credit facility to be underwritten by Truist Securities, Citizens Bank, N.A., KeyBanc Capital Markets and Mizuho Securities. The borrowing base of Ring Energy, Inc. $1.0 billion credit facility will be increased from $350.0 million to $600.0 million upon closing of the transaction.
The board will be expanded from seven to nine directors to include two members proposed by Warburg Pincus. Ring’s current senior management team will continue to lead the pro forma company.
The deal is subject to regulatory approvals, including antitrust regulations, Ring Energy shareholder approval, listing of new shares on the stock exchange, debt financing secured by Ring Energy, consummation of due diligence and financial audit of Stronghold, and the execution of registration rights, lock-up, and nomination agreements. The transaction was approved by a unanimous vote of Ring’s Board of Directors. The closing is anticipated in the third quarter of 2022. The deal is immediately accretive across key metrics, including cash flow per share, free cash flow per share, free cash flow yield, net production per share and net proved reserves per share.
Raymond James and Truist Securities acted as financial advisors to Ring, and Piper Sandler & Co. acted as financial advisor to Stronghold. Mizuho Securities provided a fairness opinion to Ring’s Board. Reid A. Godbolt and Adam J. Fogoros of Jones & Keller, P.C. provided legal counsel to Ring while Adam D. Larson, Rahul D. Vashi, Julian J. Seiguer, Matthew D. Turner, Mark Dundon, Jonathan E. Kidwell, and Will Bos of Kirkland & Ellis LLP provided legal counsel to Stronghold Energy II Operating and Stronghold Energy II Royalties, LP.
Ring Energy, Inc. (NYSEAM:REI) acquired Assets of Stronghold Energy II Operating, LLC and Stronghold Energy II Royalties, LP on September 1, 2022. Consideration for the transaction consisted of: Approximately $170 million in cash; $15 million of a deferred cash payment on or about February 28, 2023; $20 million for the assumption of a Stronghold hedge liability; and the issuance of approximately 21.3 million shares of common stock and 153,176 shares of Convertible Preferred Stock, convertible into approximately 42.5 million shares of common stock upon a stockholder vote.