| Item 1.01 | Entry Into a Material Definitive Agreement. |
On January 24, 2023, wholly-owned subsidiaries of Matador Resources Company (“Matador”), MRC Hat Mesa, LLC (“Purchaser”) and, solely for the purposes of guaranteeing the obligations of Purchaser, MRC Energy Company (“MRC Energy”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with AEP EnCap HoldCo, LLC (“AEP EnCap”), Ameradvance Management LLC (“ManagementCo” and, together with AEP EnCap, each a “Seller” and collectively, the “Sellers”) and Advance Energy Partners Holdings, LLC (the “Target”). Pursuant to the Purchase Agreement, Sellers have agreed to sell to Purchaser, and Purchaser has agreed to purchase from Sellers, all of the issued and outstanding membership interests (the “Subject Securities”) of the Target, upon the terms and subject to the conditions of the Purchase Agreement (such purchase and sale, together with the other transactions contemplated by the Purchase Agreement, the “Acquisition”).
The consideration payable by Purchaser for the Subject Securities will be (i) an amount in cash equal to $1,600,000,000 (the “Unadjusted Purchase Price”), of which $80,000,000 will be deposited into escrow in connection with the execution of the Purchase Agreement, and (ii) for each calendar month during calendar year 2023 in which the average of the daily settlement price for the West Texas Intermediate (WTI) light sweet crude oil prompt month futures contract for such calendar month exceeds $85.00, a payment equal to $7,500,000 (all such payments for the 12 calendar months in 2023, the “Contingent Consideration”). The Unadjusted Purchase Price is subject to certain customary adjustments, including for working capital and for title defects and environmental defects.
The consummation of the Acquisition (the “Closing”) is subject to the satisfaction or waiver of a number of conditions set forth in the Purchase Agreement, including, among others, the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. Subject to the satisfaction of the conditions in the Purchase Agreement, the Closing is expected to occur in the second quarter of 2023.
The Purchase Agreement contains representations, warranties and covenants of the parties customary for a transaction of this nature. In addition, Purchaser, on the one hand, and Sellers, on the other hand, have agreed to indemnify each other and their respective affiliates, shareholders, members, officers, directors, employees and other representatives for certain losses, including, among other things, breaches of representations, warranties and covenants, subject to certain negotiated limitations, deductibles, thresholds and survival periods set forth in the Purchase Agreement.
The foregoing description of the Acquisition and the Purchase Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Purchase Agreement, a copy of which is filed as Exhibit 2.1 to this Current Report on Form 8-K (this “Current Report”) and is incorporated herein by reference. This summary of the principal terms of the Purchase Agreement and the copy of the Purchase Agreement filed as Exhibit 2.1 have been included to provide investors with information regarding its terms. It is not intended to provide any other factual information about Matador, Purchaser, MRC Energy, the Sellers, the Target or any of their respective subsidiaries or affiliates. In particular, the assertions embodied in the representations and warranties contained in the Purchase Agreement are qualified by information in confidential disclosure schedules provided by the parties in connection with the signing of the Purchase Agreement. These confidential disclosure schedules contain information that modifies, qualifies and creates exceptions to the representations and warranties and certain covenants set forth in the Purchase Agreement. Moreover, the representations, warranties and covenants in the Purchase Agreement were made as of specific dates, were made solely for the Purchase Agreement and for the purposes of allocating risk between the parties to the Purchase Agreement, rather than establishing matters as facts, are solely for the benefit of such parties, may be subject to qualifications or limitations agreed upon by such parties and may be subject to standards of materiality applicable to such parties that differ from those generally applicable to investors and reports and documents filed with the Securities and Exchange Commission (the “SEC”). Accordingly, investors are not third-party beneficiaries under the Purchase Agreement and the representations, warranties and covenants in the Purchase Agreement, and any descriptions thereof, should not be relied on as characterizations of the actual state of facts or circumstances of Matador, Purchaser, MRC Energy, the Sellers or the Target. Moreover, information concerning the subject matter of such representations, warranties and covenants may change after the date of the Purchase Agreement, which subsequent information may or may not be fully reflected in the parties’ public disclosures.
