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Oklahoma based Petroleum Company Acquired Sabalo Energy

Oklahoma based Petroleum company announced a purchase and sale agreement to acquire the assets of Sabalo Energy which is a portfolio company of EnCap Investments, and a non-operating partner for about $715 million. The deal is subject to customary closing price adjustments which include $625 million in cash and approximately 2.5 million shares of Laredo common equity.

The Oklahoma based Petroleum company announced the sale of 37.5% of its operated proved developed producing reserves in its legacy leasehold in Reagan and Glasscock counties to an affiliate of Sixth Street Partners for proceeds of $405 million. The additional cash flow was based on earn-out payments over the next six years. There are no proven developed  production reserves in Howard or Western Glasscock counties. The transactions are expected to close July 1.

Jason Pigott, President and Chief Executive Officer of Laredo petroleum said that the transformational impact for Laredo of the combined transactions is significant. Upon closing the company will be positioned for sustainable free cash flow generation and significant deleveraging, have more than 30,000 highly productive, contiguous net acres in Howard County and a near-term pathway to increasing our oil cut to more than 50% from the current 30%.

Pigott also added that the value developed from employing Laredo’s efficient, low-cost undertakings in Howard County has been established on its current leasehold and the company expects to accomplish equally well on this new property. They will be mainiting the company’s prior commitment to reduce greenhouse gas intensity nethan emissions and eliminating routine flaring.Doug Swanson, Managing Partner of EnCap said that the transaction accelerates Oklahoma based Petroleum company’s transformation to becoming a leading independent operator in the Midland Basin. Swanson said that Laredo is well positioned to maximize value from the Sabalo assets and we view this transaction as compelling for Laredo shareholders, including EnCap, as part of this transaction.

Citigroup and Houlihan Lokey gave advisory services on the Sabalo acquisition and Houlihan Lokey acted as financial advisor on the proved developed producing reserves sale to Sixth Street. Akin Gump and Willkie Farr & Gallagher served as Laredo’s legal advisors. Jefferies acted as exclusive financial advisor to Sabalo and Bracewell served as Sabalo’s legal advisor. White & Case acted as legal advisor to Sixth Street.

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