Pure-play Permian operator Lilis Energy Inc. (AMEX: LLEX) said June 11 it agreed to an acreage swap set to boost the company’s core position and current net production in the Delaware Basin.

The swap is comprised of an acre-for-acre trade with an undisclosed company of about 1,500 net acres in Winkler and Loving counties, Texas. Lilis said the trade will increase the company’s gross working interest in its Texas Delaware Basin asset by up to 35%.

Upon closing, the acreage trade will also add about 100 net operated locations targeting the Wolfcamp A, B and XY, Bone Springs, and additional benches to Lilis’ portfolio as well as a net gain of roughly 500 to 1,000 boe/d of current production.

Overall, Mike Kelly, senior analyst with Seaport Global Securities, said he believes Lilis’ acreage swap marks “another positive step in the right direction” for the company.

So far this year, Lilis has continued to bolster its Delaware position with deals that include a $65 million acquisition that closed in March and a new crude oil gathering agreement with Salt Creek Midstream LLC in May. Lilis also recently announced “important" delineation results on its eastern acreage.

“We believe both investors and industry players are taking note of Lilis’ potential—the stock is up more than 40% over the last three months, marking the best Permian pure-play performance under our coverage,” Kelly said in a June 11 note.

Lilis’ shares were trading at $5.06 a share at 9:14 a.m. CDT June 11 compared to the stock’s closing price of $3.64 on March 12.

However, Kelly said Lilis still reflects a valuation of only $18,000 per acre despite the run in the stock, which is well below the recent neighboring Concho Resources/RSP Permian deal done at $76,000 per acre.

“This valuation discrepancy marks a major opportunity,” he said.

Ronald D. Ormand, chairman and CEO of Houston-based Lilis, said the company’s acreage swap transaction achieves one of its key strategic objectives of 2018: to grow core areas.

“The production and working interests added from this transaction and additional wells in completion moves us closer to our year-end target of 7,500 net boe/d, which we expect to exceed well before year-end,” Ormand said in a statement.

Ormand added Lilis will continue to actively seek to core up acreage and strategically increase its average working interest in the basin.

Lilis’ current total net acreage in the Permian Basin is more than 19,000 acres, according to the company press release.

As part of the acreage swap, Lilis will receive acreage concentrated in two sections of its main operational area in the Delaware, where the company is operating and completing wells. As a result, the company’s operatorship in five key drilling units will increase up to 90% gross working interests.

In exchange, Lilis traded acreage all located in nonoperated sections with lower working interests, the company said.

Lilis said the transaction is subject to customary adjustments and is expected to close in the next 45 days.

Emily Patsy can be reached at epatsy@hartenergy.com.

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