Item 1.01
|
Entry into a Material Definitive Agreement
|
Closing of ExL Acquisition
On August 10, 2017, Carrizo Oil & Gas, Inc. (the Company) and the Companys wholly-owned subsidiary Carrizo (Permian) LLC
(Carrizo Permian) completed the closing (the Closing) of the transactions (the ExL Acquisition) contemplated by the purchase and sale agreement (the ExL Purchase Agreement) with ExL Petroleum
Management, LLC and ExL Petroleum Operating Inc. (together, ExL). At the closing, the Company and Carrizo Permian collectively purchased approximately 16,508 net acres located in the Delaware Basin in Reeves and Ward Counties, Texas (the
ExL Properties), for aggregate consideration of approximately $676.0 million in cash, which includes a $75.0 million performance deposit previously paid by the Company, as well as customary purchase price adjustments, including
adjustments for net cash flows that are attributable to the ExL Properties on or after May 1, 2017, the effective date for the acquisition. The price paid at the Closing reflects an approximate $28.0 million increase from the previously
announced $648.0 million to reflect closing adjustments. The final purchase price will be subject to additional post-closing adjustments.
As
previously disclosed, the Company has also agreed to pay an additional $50.0 million per year if the average daily closing spot price of a barrel of West Texas Intermediate crude oil as measured by the U.S. Energy Information Administration
(the EIA WTI average price) is above $50.00 for any the years of 2018, 2019, 2020 and 2021, with such payments due on January 29, 2019, January 28, 2020, January 28, 2021 and January 28, 2022, respectively. This
payment (the Contingent ExL Payment) will be zero for the respective year if such EIA WTI average price of a barrel of oil is $50.00 or below for any of such years, and the Contingent ExL Payment is capped at and will not exceed
$125.0 million.
Preferred Stock Purchase Agreement
As previously reported, as part of the financing for the acquisition of the ExL Properties, on June 28, 2017, the Company entered into the preferred stock
purchase agreement (the Preferred Stock Purchase Agreement) with certain funds managed or
sub-advised
by GSO Capital Partners LP and its affiliates (collectively, the GSO Funds).
Simultaneously with the Closing, pursuant to the Preferred Stock Purchase Agreement, the Company issued to the GSO Funds (i) 250,000 shares of 8.875%
Redeemable Preferred Stock, par value $0.01 per share (the Preferred Stock) and (ii) warrants (the Warrants) for 2,750,000 shares of common stock of the Company, par value $0.01 per share (the common stock),
for aggregate net proceeds of approximately $236.2 million, net of commitment fees and offering costs of the issuance.
Warrant Agreement
Pursuant to the Preferred Stock Purchase Agreement, on August 10, 2017, in connection with the Closing, the Company entered into a Warrant Agreement with
Wells Fargo Bank, N.A., as warrant agent, to, among other things, authorize and establish the terms of the Warrants to purchase 2,750,000 shares of the Companys common stock at an exercise price per share of $16.08, subject to certain
adjustments described below. The Warrants are exercisable for a
ten-year
period and may only be exercised on a net share settlement basis.
The exercise price and the number of shares of the Companys common stock for which a Warrant is exercisable are subject to adjustment from time to time
upon the occurrence of certain events including: (i) payment of a dividend or distribution to holders of shares of the Companys common stock payable in the Companys common stock, (ii) the distribution of any rights, options or
warrants to all holders of the Companys common stock entitling them for a period of not more than 60 days to purchase shares of the Companys common stock at a price per share less than the fair market value per share, (iii) a
subdivision, combination, or reclassification of the Companys common stock, (iv) a distribution to all holders of the Companys common stock of cash, any shares of the Companys capital stock (other than the Companys
common stock), evidences of indebtedness or other assets of the Company, and (v) any dividend of shares of a subsidiary of the Company in a
spin-off
transaction.
The foregoing description of the Warrant Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the
Warrant Agreement, which is filed as Exhibit 4.1 to this Current Report on Form
8-K
and incorporated herein by reference.
Registration Rights Agreement
Pursuant to the Preferred Stock Purchase Agreement, on August 10, 2017, in connection with the Closing, the Company entered into a registration rights
agreement with the GSO Funds (the Registration Rights Agreement). The Registration Rights Agreement grants the GSO Funds certain registration rights for the Preferred Stock and shares of the Companys common stock issued to the GSO
Funds by the Company, including shares issuable upon the exercise of the Warrants and shares issued to pay dividends on or redeem the Preferred Stock. The Registration Rights Agreement provides that the Company will use its commercially reasonable
efforts to prepare and file a shelf registration statement with the U.S. Securities and Exchange Commission (the SEC) within 90 days after the date of the Closing and to cause such shelf registration statement to be declared effective as
soon as practicable after its filing to permit the public resale of all registrable securities covered by the Registration Rights Agreement.
The Company
may generally be required to effect registrations for up to three underwritten offerings; depending upon the amount of registrable securities, then held by the GSO Funds, provided that any such offering involves at least $100 million of
registrable securities, or a number of shares of the Companys common stock issued in redemption of at least $100 million of liquidated preference of the Preferred Stock. The Company has generally agreed to pay the related registration
expenses and has also agreed to indemnify the GSO Funds for certain liabilities arising from such registrations.
The foregoing description of the
Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Registration Rights Agreement, which is attached as Exhibit 10.1 to this Current Report on Form
8-K
and incorporated by reference herein.
Standstill and Voting Agreement
In addition, pursuant to the Preferred Stock Purchase Agreement, on August 10, 2017, in connection with the Closing, the Company and the GSO Funds entered
into a Standstill and Voting Agreement (the Standstill and Voting Agreement). The GSO Funds agreed that, without the prior consent of the Company, the GSO Funds and their controlled affiliates will not, among other things, refrain from
taking specified actions with respect to the Company (including its board, control and governance) and its securities. The GSO Funds also agreed to vote their equity interests in the Company in certain circumstances as either (i) recommended by
the Board to the holders of Voting Securities of the Company or (ii) consistent with, and in proportion to, the votes of the other shareholders of the Company.
The foregoing description of the Standstill and Voting Agreement does not purport to be complete and is qualified in its entirety by reference to the full
text of the Standstill and Voting Agreement, which is attached as Exhibit 10.2 to this Current Report on Form
8-K
and incorporated by reference herein.