Resolute Energy Corporation (“Resolute” or the “Company”) (NYSE: REN) today reported that it has entered into a definitive agreement (the “Acquisition Agreement”) with undisclosed private sellers (together, “Sellers”) to acquire producing and undeveloped oil and gas properties in Reeves County, Texas (the “Properties”) for a purchase price of $160 million. The transaction is expected to close on or about May 15, 2017, subject to customary conditions.
Acquiring approximately 4,600 net acres in Reeves County, consisting of 2,187 net acres adjacent to Resolute’s existing operating area in Reeves County (the “Orla Project Area”) and 2,405 net acres in southern Reeves County (the “Southwest Rim Project Area”)
The Orla Project Area includes:
Interests in two operated 4,500 foot horizontal Wolfcamp wells that currently produce approximately 800 net Boe per day.
Six operated drilled but uncompleted Wolfcamp wells (“DUCs”), four of which have lateral lengths of approximately 4,500 feet and two with approximately 7,500 foot laterals; one non-operated 10,000 foot lateral Wolfcamp well is currently drilling.
Currently estimate that the acreage supports 112 gross (54 net) locations targeting the upper and lower Wolfcamp A and the Wolfcamp B on 80-acre spacing, two-thirds of which support drilling mid- to long-lateral lengths.
Additional drilling upside exists in the Wolfcamp X/Y and Wolfcamp C.
Approximately 95 percent operating control of drilling locations.
The Southwest Rim Project Area includes:
2,405 net acres with development potential in the Wolfcamp and other zones.
Proximate to successful Wolfcamp wells approximately five miles east of this acreage as well as Barnett and Woodford development in the nearby Alpine High area.
Operated, highly contiguous acreage with an average 70 percent working interest; more than two and one half years of primary term left on the leases.
Resolute plans to complete all of the DUCs sequentially immediately following closing of the acquisition and expects to have all of them on production by mid-July of 2017. Resolute is currently running two rigs in the Delaware Basin and is evaluating adding a third rig in the second half of 2017 to accelerate development of the Orla acreage position.
Consideration for the acquisition will be $160 million cash, subject to customary adjustments. Resolute is evaluating the optimal financing for this transaction, and anticipates that the ultimate financing may have components of long-term debt and equity. In the interim, however, Resolute has entered into a commitment letter for a $100 million bridge financing facility with BMO Capital Markets. Together with borrowing availability under its revolving credit facility, the bridge facility would allow Resolute to close the acquisition without an immediate longterm debt or equity issuance.
Rick Betz, Resolute’s Chief Executive Officer, said: “This is exactly the kind of targeted, focused, consolidating opportunity that leverages the strengths of our team and our assets. Upon closing, we will have approximately 21,000 net acres in Reeves County, where we have been drilling some of the most successful Wolfcamp wells in the Delaware Basin. This part of the basin is one of the most exciting and economically attractive oil and gas plays in the U.S. The acreage to be acquired is adjacent to our Appaloosa project area and immediately north of our Mustang project area, and 95 percent of the acquired acreage will be operated by Resolute.
“As we complete the drilled but uncompleted wells and look to accelerate development of the combined acreage position with a third rig later this year, we expect that this transaction will add materially to our production beginning in the second half of 2017. As with our Firewheel acquisition in October 2016, this transaction allows us to add acreage, production and opportunity without either the uncertainty associated with acquiring acreage outside of Reeves County or adding significantly to our staffing and infrastructure needs. ”
The Acquisition Agreement contains terms and conditions customary to transactions of this type. The purchase price is subject to customary purchase price adjustment. Subject to our right to be indemnified for certain liabilities for a limited period of time and for breaches of representations, warranties and covenants, we will assume substantially all liabilities associated with the acquired properties. The closing of the acquisition is expected to occur on or about May 15, 2017, and is subject to the satisfaction or waiver of certain customary conditions, including the material accuracy of the representations and warranties of us and Sellers, and performance of covenants. The Acquisition Agreement contains certain customary termination rights for each of us and Sellers. The transaction will have an effective date of May 1, 2017.
Investor Presentation Supplement
We will post a supplement to our investor presentation on our website at www.resoluteenergy.com.