Warren Resources Pays $16 Million For Monterey Assets

To buy interest in the Leroy Pine Project area in Santa Barbara County.

Warren Resources Inc. (Nasdaq: WRES) will pay $16 million for an interest in the Leroy Pine Project area in Santa Barbara, Calif., the company said Aug. 5.

Warren anticipates drilling 19 producing wells targeting the oil zones of the Monterey formation and two disposal wells on 1,610 acres within the Santa Maria Valley oil field.

The Leroy Pine Project gives Warren entry into the Monterey oil formation in California. By U.S. Energy Department estimates, the Monterey oil shale formation accounts for approximately two-thirds of the oil shale reserves in the United States.

Philip A. Epstein, chairman and CEO, said Leroy Pine is a project that allows Warren to “leverage its skill set in the reactivation and future development of California oil projects.

“Our drill-and-learn approach in Leroy Pine will be a stepping stone to the company's development of additional projects in the Monterey oil formation and other opportunities within California."

Warren’s deal gives it an undivided 62.5% working interest in the land, which was developed by Unocal between 1937 and 1994. Unocal drilled 24 wells and produced 6 million barrels of oil. The closing of the sale is expected to occur on or before Aug. 30.

Warren most recently acquired upstream and midstream interests from Anadarko in the Atlantic Rim and became operator focused on reducing expenses.

The company’s 2013 capital expenditures are expected to be $73 million, according to a June investor presentation. The company is investing in wells, including drilling 23 in California as well as strategic acquisitions.

Warren stated liquidity of about $66 million in June and a 50% production hedge target. Warren increased its oil production 22% in 2012.

Warren is an independent energy company with activities in the Wilmington field in California and natural gas in the Washakie Basin in Wyoming. The company is based in New York.