Dune Energy agrees to sell field to repay revolver, invest in assets

By Caroline Salls

Pittsburgh, April 29 - Dune Energy, Inc. has reached an agreement in principle to sell its interests in the South Florence field for $30 million to a private party to either temporarily or permanently repay borrowings under its $40 million revolving credit facility and/or to invest in new assets or fund maintenance, repair or improvement of its existing properties and assets, according to a company news release.

The company said it expects to close this sale early in the third quarter, with an effective date of May 1.

The sale will be subject to negotiation and execution of definitive purchase and sale documents, modification or waiver of applicable provisions of Dune's credit facility, approval by Dune's board of directors, obtaining an independent opinion as to fair value of the property to be sold and other customary closing conditions.

"We have defined many accretive economic opportunities in our asset base that are capital starved," president and chief executive officer James A. Watt said in the release.

"Our current capital availability severely limits our ability to invest in these value-added prospects.

"The sale of the South Florence field, along with our industry marketing efforts, will free capital to invest in higher rate of return projects and develop the upside potential of our program."

As previously reported, Dune is in discussions with the holders of its $300 million in principal amount of 10½% senior secured notes due June 2012, with a view toward an overall restructuring of the company's balance sheet.

To date, Dune said it has not reached an agreement with holders of a sufficient principal amount of the notes to ensure a restructuring can be implemented in a timely and cost effective manner, but the company plans to continue discussions with the noteholders to achieve a debt restructuring that would be equitable for all its stakeholders and free capital to fully implement development of its upside potential.

In addition, the company said the highly dilutive impact of the make-whole provisions applicable to conversions of its outstanding 195,364 shares of 10% senior redeemable convertible preferred stock has ceased because of the setting of an April 2 record date for the June 1 dividend.

"We will continue industry marketing of deals, sale of non-core assets and negotiations with our noteholders to be able to dedicate more capital to our high potential upside opportunities within our existing asset base," Watt said in the release.

"These efforts should result in long term value for all stakeholders."

Dune Energy is a Houston-based energy company.

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