Reslute Energy Buys Permian Assets
Purchase of producing and prospective acreage in Permian Basin in Howard Cnty, TX and Lea Cnty, NM.
Resolute Energy Corp. (NYSE: REN) plans to buy producing and undeveloped acreage in the Permian Basin from a private seller for about $120 million.
The assets are primarily located in Howard County, Texas, and Lea County, New Mexico. Combined, the acquired properties produced a net 1,418 barrels of oil equivalent (BOE) per day in the third quarter 2012 and had estimated proved reserves of 4.1 million BOE, of which 73% is crude oil. Resolute Energy believes that there may be significant additional resource potential in excess of the reserves currently categorized as proved.
The company expects to finance the acquisition with debt and to close the transaction around Dec. 21. The transaction has an effective date of Aug. 1.
The Howard County assets include non-operated working interests of approximately 39%, consisting of 1,310 net acres primarily targeting the Wolfberry play. The 23 existing wells produced a net 377 BOE per day in the third quarter of 2012, approximately 64% of which was crude oil. This acreage is approximately six miles from the company's existing operations in Howard and Martin counties.
Growth potential exists from approximately 64 vertical drilling locations targeting the Wolfberry interval and 66 recompletion opportunities that are not categorized as proved. Other upside exists from the multi-pay, multi-play nature of the area, which is prospective for horizontal development in the Wolfcamp and Cline.
The acreage is largely held by production, and Resolute estimates that a one-rig program for two years will hold all of the acquired leases.
The primary asset acquired in Lea County is Denton Field, which was discovered in the 1950s and is a conventional fractured carbonate reservoir. The assets include 2,767 net acres (2,880 gross), all of which are held by production, and in the third quarter of 2012 the 39 existing wells produced a net 833 BOE per day. Approximately 89% of production consisted of crude oil. Resolute will be the operator of the Lea County assets.
Growth potential and upside exists from activities associated primarily with the deepening of existing wells and infill drilling from 40-acre to 20-acre spacing.
Other assets being acquired are a combination of conventional and unconventional producing properties in the Permian Basin. The acquired assets comprise 2,455 net acres (3,380 gross acres, all held b production) and produced 208 net BOE per day in the third quarter 2012.
Nicholas J. Sutton, Resolute's chairman and chief executive, said: "We plan to realize the growth potential from these new assets, which is largely self-funded, with a drilling program over the next four to five years. The Permian Basin is an area we have long targeted as an important growth engine for the Company, and this most recent expansion further strengthens our visible growth potential in this multi-pay, multi-play oil-prone region."