Energy Hunter Resources, Inc., an exploration and production company with a balanced portfolio of oil and natural gas properties located in the Permian Basin and Eagle Ford Shale regions and headquartered in Dallas, Texas, announced today that it has entered into a definitive agreement with Lubbock Energy Partners, LLC to acquire approximately 9,413 net acres located in the San Andres oil play of the Central Basin Platform portion of the Permian Basin in a 50/50 cash and restricted stock transaction valued at approximately $22.6 million.
The transaction, which is anticipated to close later this summer, is subject to satisfaction of customary closing conditions. Energy Hunter Resources expects to fund the cash portion of the transaction through an offering of common stock under Regulation A+, which it anticipates launching in the near future. Upon successful conclusion of the Regulation A+ Equity Offering, Energy Hunter Resources plans to begin trading its securities on the NASDAQ Capital Markets Exchange under the ticker symbol (NASDAQ: EHR).
- Approximately 9,413 net acres located in Cochran County, Texas
- Low acquisition cost
- 100% of the acreage block is held by existing production (vertical wells)
- The San Andres formation is part of the Northwestern Shelf of the Permian Basin
- Over 31 identified horizontal drilling locations and numerous vertical recompletion opportunities
- 97-100% WI being acquired
- Positive drilling economics down to $30 per barrel
- 160 vertical producer wells, extensive production facilities, active infrastructure including salt water disposal wells (“SWD”) and facilities
It is estimated that the total resource potential in the San Andres formation now exceeds 100 billion barrels of oil. Vertical wells historically drilled in this formation provide a solid base of geological and reservoir data to support the basis for utilizing the most advanced horizontal drilling and completion technology available today. Gary C. Evans, Chairman and Chief Executive Officer of Energy Hunter Resources noted, “By entering into our definitive agreement to acquire almost 10,000 net acres located in an existing field with minimal vertical drainage in West Texas, we are providing our shareholders with a unique future development opportunity. We now have highly repeatable horizontal drilling locations that can provide strong economic returns down to $30.00 per barrel.”
Evans continued, “The existing wells and acreage, located in the Slaughter-Levelland Field of the San Andres formation, is held by production (“HBP”) which will allow our technical team to systematically recomplete and re-develop this property in the most efficient manner possible. In addition, acquisition of the property includes over 160 wells, production facilities, significant active infrastructure including salt water handling wells and facilities. Initial reservoir modeling indicates that there are over 31 potential horizontal well locations based on the amount of acreage acquired with this acquisition which provides for a minimum of four laterals for every 640 acre spacing unit.”
After the closing of the acquisition, Energy Hunter Resources will own and operate substantial existing infrastructure in the San Andres, including oil and natural gas gathering lines, SWD wells, gathering lines and injection pumps, and electricity lines, all of which will reduce up front capital costs and provide meaningful savings and efficiencies from field operations.
Evans concluded, “Since forming Energy Hunter Resources this time last year, our team has looked at literally hundreds of deals, predominately within the Permian Basin. Prices for most transactions appear to be at very lofty levels, based upon historical comparisons. This contiguous San Andres acreage block has all the characteristics we have been seeking. With the favorable geology, quality of reservoir, existing infrastructure, return metrics and low entry cost, we believe the San Andres formation to be one of the best performing regions within the Permian Basin. Our business is all about rate of return on capital deployed. We think this property, along with our existing acreage position in South Texas, will provide some of the highest returns on new generation drilling within our industry.”