Resaca To Sell Permian Oil & Gas Assets

Plans to sell a majority of its oil and gas properties in the Permian Basin.

Resaca Exploitation Inc. (AIM: RSOX) plans to sell all a majority of its oil and gas properties in the Permian Basin to an undisclosed buyer for an unstated amount.

The company announced it expects the sale to close in the later half of the second quarter. The agreement contains a breakup clause to the effect that Resaca would be required to pay $3.6 million to the buyer in the event that there is a breach of exclusivity.

Resaca plans to hold its interests in the North Iatan property after closing.

The Houston-based company was formed in 2006 to exploit a number of oil and gas properties in the Permian Basin. The company targets mature properties and works to enhance oil recovery with CO2 flooding techniques.

Resaca reported total proved reserves of 14.4 million barrels of oil equivalent (MMboe), 88% of which is oil, as of June 30, 2012.

It has struggled with debt over the last year and found itself out of compliance with its debt covenants when its debt to EBITDA ratio fell above a stated ratio.

The company’s properties include the Cooper Jal Unit Complex in Lea County, New Mexico, which includes 2,541 acres. At Cooper Jal, Resaca produces from three separate formations of Permian age from two separate fields.

In addition, the Penwell Complex located in Ector and Crane Counties, Texas comprises the Jordan San Andres Unit (1,322 acres), the Jordan San Andres Unit offset acreage (1,375 acres), and the Edwards Grayburg Unit (1,847 acres) for a total of 4,544 acres and produces from the San Andres, Grayburg and Queen formations.

In August 2011, Resaca acquired the Langlie Jal Unit in Lea County, New Mexico, near the city of Jal and the Company’s largest property, – the Cooper Jal Unit.