PetroQuest Energy Inc. (NYSE: PQ) said Dec. 20 it acquired Central Louisiana assets targeting the Austin Chalk Formation, marking its entry into the oil play.

The acquisition included execution of agreements with undisclosed companies for interests in about 24,600 gross acres. PetroQuest plans to fund the acquisition with $8.75 million in proceeds from the sale of certain water disposal assets in East Texas, $6 million cash on hand and the issuance of 2 million shares.

The total transaction value for the acquisition is about $18.55 million, as of PetroQuest's closing share price of $1.59 on Dec. 20.

"We are excited to have an early, first mover position in this emerging oil play right in our backyard at a very attractive cost," Charles T. Goodson, PetroQuest's chairman, CEO and president, said in a statement. "Based on recent well results in the area of our acreage, as well as in South Texas, the application of contemporary horizontal drilling and fracking is showing a material impact on resource recovery from the Austin Chalk Formation."

PetroQuest expects the emerging Austin Chalk play to complement the company's growing East Texas operations, according to the company release.

"Our [Austin Chalk] acreage position is expected to provide us with a capital allocation option to grow our oil production, which should complement our gas-weighted Cotton Valley assets in terms of diversifying our future production mix and cash flow," Goodson said.

PetroQuest said it plans to drill its initial horizontal test well on its Austin Chalk position during second-quarter 2018. The company's strategy includes utilizing data from existing vertical and unfracked horizontal wells in the area and from fracked horizontal wells that are expected to be drilled in the area.

Goodson added the Austin Chalk assets are located with available takeaway options close to the Gulf Coast refineries and rapidly expanding options for NGL and associated natural gas.