Legacy Reserves LP and Funds Managed by TPG Special Situations Partners Sign Definitive Agreements to Jointly Develop Legacy's Permian Basin Acreage

MIDLAND, Texas, July 6, 2015 (GLOBE NEWSWIRE) -- The operating subsidiary of Legacy Reserves LP (Nasdaq:LGCY) ("Legacy") announced that it has entered into an agreement with funds managed by TPG Special Situations Partners ("TSSP") to fund horizontal development of certain of Legacy's Spraberry, Wolfcamp and Bone Spring rights in the Permian Basin. The primary acreage covered by the arrangement is approximately 6,000 net acres in Howard, Reagan, and Crockett Counties, Texas and Lea County, New Mexico, on which Legacy estimates there are over 150 horizontal locations requiring over $700 million of capital deployment net to the Legacy and TSSP interests.

Under the terms of the agreement, Legacy will convey to TSSP an undivided 87.5% of Legacy's working interest in the covered oil and gas properties subject to re-assignment, reversion and other adjustments. Legacy and TSSP will establish tranches of proposed horizontal locations, with TSSP funding 95% of Legacy's drilling and completion costs and receiving 87.5% of certain of Legacy's interests in any wells in such tranche until it achieves a 1.0x return on investment ("ROI Hurdle"). Legacy will fund 5% of the drilling and completion costs and retain 12.5% of certain of its interests prior to the ROI Hurdle. Upon achievement of the ROI Hurdle, TSSP will revert to 63% of Legacy's initial interest while Legacy will revert to 37% until TSSP achieves a 15% internal rate of return ("IRR Hurdle"). Upon achievement of the IRR Hurdle, TSSP will revert to 15% of Legacy's initial interest while Legacy will revert to 85%, and all the remaining undeveloped interests will revert to Legacy but remain available for future development under the agreed structure. TSSP has initially committed $150 million to fund the first tranche which, based on Legacy's anticipated two to three rig drilling program, will take approximately one year. Additionally, TSSP has the right to participate in any future identified horizontal development opportunities in the Delaware and Midland Basins under the same economic terms.

Key highlights of the transaction for Legacy include:

  • 7.5% carried working interest and reversions are expected to provide Distributable Cash Flow accretion and long-term, low-decline production.
  • Asset-level structure (i) has no impact to capital structure, (ii) does not dilute unitholders, and (iii) allows proved reserve bookings attributable to projected reversions.
  • TSSP's portfolio size and acumen bring potential future investment avenues to Legacy.
  • Structure uniquely balances (i) maximizing the potential of Legacy's high-quality undeveloped Permian acreage position, (ii) reducing capital expenditures in capital intensive, high-cost horizontal drilling and (iii) maintaining a long-lived, low-decline production profile.

"We are extremely pleased to announce this definitive agreement with TSSP to create a structure that will allow Legacy to efficiently monetize a significant portion of our undeveloped assets in the Permian. With strong financial backing from TSSP, we believe we have implemented the right structure and look forward to prosecuting a multi-year plan that will harness the value of our undrilled horizontal positions, all while maintaining the key tenet of the upstream MLP model – predictable, long-lived, low-decline production," said Paul T. Horne, the President and Chief Executive Officer of Legacy's general partner. "We will start with a $150 million initial program and, subject to TSSP's consent, will continue to jointly develop future similar programs. We are encouraged by the support of TSSP and believe we have found a good, long-term partner."

Matt Dillard, a Partner of TSSP noted, "We are excited to work with Legacy to assist in unlocking value in its considerable undeveloped acreage position across some of the Permian Basin's most active areas. Given Legacy's operating experience, we expect this agreement to generate significant value for both parties and remain hopeful that we can deploy capital for several years into Legacy's projects."

Jefferies LLC acted as sole financial advisor and Andrews Kurth LLP acted as legal advisor to Legacy in this transaction. Vinson & Elkins LLP acted as legal advisor to TSSP.

To provide additional context for this transaction, Legacy has posted presentation slides at www.LegacyLP.com and a teleconference and webcast will be held on Tuesday, July 7, 2015, beginning at 9:00 a.m. Central Time. Those wishing to participate in the conference call should dial (877) 266-0479. A replay of the call will be available through Tuesday, July 14, 2015, by dialing (855) 859-2056 and entering replay code 78032712. Those wishing to listen to the live or archived webcast via the Internet should go to the Investor Relations tab of our website at www.LegacyLP.com.

Cautionary Statement Relevant to Forward-Looking Information

This press release includes forward-looking statements regarding future events. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties and factors, many of which are outside the control of Legacy Reserves LP, and a variety of risks that could cause results to differ materially from those expected by the management of Legacy Reserves LP. Legacy Reserves LP undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.

About Legacy Reserves LP

Legacy Reserves LP is a master limited partnership headquartered in Midland, Texas, focused on the acquisition and development of oil and natural gas properties primarily located in the Permian Basin, Rocky Mountain and Mid-Continent regions of the United States. Additional information is available at www.LegacyLP.com.

About TPG Special Situations Partners

TSSP, with over $12 billion of assets under management as of March 31, 2015, is the dedicated special situations and credit platform of TPG, a leading global private investment firm founded in 1992. TSSP has extensive experience with highly complex, global public and private investments executed through primary originations, secondary market purchases and restructurings.

CONTACT: Legacy Reserves LP Dan Westcott, Executive Vice President and Chief Financial Officer 432-689-5200 TPG Special Situations Partners Owen Blicksilver Public Relations, Inc. Lisa Baker 914-725-5949 lisa@blicksilverpr.com Jennifer Hurson 845-507-0571 jennifer@blicksilverpr.com

Source:Legacy Reserves LP