Resolute Energy Corp (NYSE:REN) is to boost its presence in the Delaware Basin in Reeves County, Texas, buying various assets for US$135mln.
The assets, known as the Firewheel properties, are being purchased from privately-owned Firewheel Energy. Resolute will pay US$90mln in cash with the rest to be settled in Resolute shares.
The Firewheel properties consist of 3,293 net acres in the Delaware Basin operating area, and include interests in thirteen horizontal and fifteen vertical wells, which produce around 1,200 net barrels of oil equivalent (boe) per day.
Resolute said around 95% of the acreage and substantially all of the production and proved reserves are located within the Mustang project area in Reeves County, where Resolute is the operator. The remainder of the acreage is also in Reeves County.
The Firewheel properties contain estimated proved reserves of 6.2mln boe with a present value (with a discount rate of 10%) of US$45.8mln, using strip pricing at June 30, 2016.
The acquisition also includes Firewheel’s interest in the earn-out agreement, to which Resolute was already a party, with Caprock Permian Processing LLC and Caprock Field Services LLC, meaning that Resolute will in future receive 100% of all payments from Caprock under the earn-out agreement.
“This acquisition adds materially to our prospective acreage in one of the most exciting US oil and gas basins, with 95% of the acquired acreage operated by Resolute. Our Mustang project area, covering more than 12,400 gross acres, is one of our two concentrated acreage positions in the Delaware Basin. This transaction allows us to add acreage, production and opportunity without either the uncertainty associated with acquiring more speculative acreage or adding to our staffing and infrastructure needs,” said Nicholas Sutton, chairman and chief executive officer of Resolute Energy.
“We believe that the Firewheel acquisition is exactly the kind of targeted, focused, consolidating opportunity that leverages the strengths of our team and our assets,” Sutton added.
Shares in Resolute were up 13.4% at US$29.11 in afternoon trading.
Story by ProactiveInvestors