Marketed: Sierra Resources South Texas Olmos Liquids-Rich Leasehold

The following information is provided by Detring Energy Advisors LLC. All inquiries on the following listings should be directed to Detring. Hart Energy is not a brokerage firm and does not endorse or facilitate any transactions.

Sierra Resources Partners LP retained Detring Energy Advisors to market for sale its roughly 24,000 net-acre contiguous, operated position in the geologic sweet spot of the liquids-rich Olmos trend in La Salle and McMullen counties, Texas.

Underpinned by strong production and cash flow, Detring said the asset is primed for development with an inventory of 64 highly-economic, long-lateral locations. Sierra has seen a material uplift in recent well performance via landing zone optimization, according to the firm. 

Highlights: 

• Roughly 24,000 Net Acres (100% Operated, about 97% Working Interest)
  • Highly-contiguous position in the geologic sweet spot of the prolific Olmos trend
    • Large mineral estates across three combined owners allows for long-lateral development and efficient surface facility build-out
  • Minimal drilling requirements to maintain the entire position
    • One well in 2019, three wells in 2020 and beyond
    • Flexibility to develop within cash flow or accelerate and bank obligation wells
• About 12 million cubic feet equivalent per day of Liquids-Rich Production (roughly 54% liquids)
  • About $12 million next 12-month proved developed producing (PDP) cash flow funds continued near-term development
  • PDP: roughly $45 million PV-10 value (about 33 billion cubic feet equivalent net reserves, 7.5 years reserves-to-production ratio)
  • 3P: roughly $370 million PV-10 value (about 470 billion cubic feet equivalent net reserves)
  • Extensive gathering, processing, and transportation infrastructure in place
    • Advantageous location for marketing & transportation yields realized pricing of $1.46-plus per barrel to West Texas Intermediate and on par to Henry Hub
• Prolific Horizontal Development Opportunity
  • 64 geologically de-risked locations
    • Roughly 80%-100% single-well internal rate of returns
    • About 14 months to payout
    • $5.6 million drilling and completion costs for 8,500 ft ($660 per lateral-ft)
  • Specific targeting of the high-porosity zone within the Olmos C has led to greater than two times improvement in recent well performance
  • Project supported by significant well control and seismic amplitude variation with offset (AVO)
    • Seismic shows Class 3 AVO characteristics consistent with AVO synthetics from rock physics modeling using control wells
    • AVO data available for review
• Extensive Geologic Data Set
  • Seismic interpretation, petrophysical analysis, core studies, mapping and static modeling geologically de-risk the acreage
  • About 36 ft high-porosity landing zone (about 12% average porosity) and underlying high net-sand interval show consistent thickness and porosity across the position with rock quality increasing away from the Edwards Reef onto Sierra’s acreage

Process Summary:

• Evaluation materials available via the Virtual Data Room on Aug. 26
• Proposals due Sept. 25

Sierra anticipates executing a purchase and sales agreement by mid-October, with closing occurring by Nov. 30.

For information visit detring.com or contact Melinda Faust at mel@detring.com or 713-595-1004.