The transaction adds 4,475 contiguous net acres in the Permian Basin with current net production of 1,400 barrels of oil equivalent per day (55% oil). (Source: Hart Energy/Shutterstock.com)
Laredo Petroleum Inc. said Dec. 9 it closed on a $65 million bolt-on acquisition in Glasscock County, Texas, marking the second purchase in the Permian Basin the Tulsa, Okla.-based company has made so far this quarter.
“We are excited to announce another acquisition that delivers on our strategy of shifting our development to oilier, more capital-efficient acreage,” Jason Pigott, Laredo Petroleum’s president and CEO, said in a statement.
Since taking over as Laredo’s CEO in October, Pigott has begun to implement his strategic vision for the company, which includes opportunistically pursuing transactions of high-margin inventory to improve capital efficiency and free cash flow generation.
Similar to an earlier acquisition in Howard County, Texas this quarter, the Glasscock County bolt-on continues to shift the company’s production mix toward oil. The transaction adds 4,475 contiguous net acres that is located in an area of high oil productivity with relevant offset wells indicating first-year oil production 37% higher than expectations for legacy Laredo Wolfcamp drilling, according to the company press release.
“This acquisition expands our Glasscock County position further to the west into an area of higher oil productivity than our established acreage position,” Pigott said. “We expect to incorporate this acreage into our drilling plan to meet HBP obligations in 2020 and 2021 and transition to full development upon completion of the Howard County development plan, extending our runway of higher-value locations to three years.”
About 80% of the acreage is HBP with current net production of 1,400 barrels of oil equivalent per day (55% oil). The deal is also expected to add about 45 total gross (35 net) locations across the Lower Spraberry, Upper Wolfcamp and Middle Wolfcamp formations at 1,320 ft spacing.
The acquisition, with an undisclosed seller, was funded with Laredo’s $1 billion senior secured credit facility, resulting in outstanding borrowings of $245 million as of Dec. 6. The company will remain committed to maintaining a competitive leverage ratio, Pigott said adding he expects to use free cash flow to pay down Laredo’s revolver.
Laredo’s Howard County acreage acquisition is expected to close in December.
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