Energy Hunter Resources, Inc., an exploration and production company headquartered in Dallas, Texas, today announced that it has completed the acquisition of 9,413 net acres located in the San Andres oil play of the Permian Basin along with certain institutional investors. One hundred percent of the existing wells and lease acreage position, located in the Slaughter-Levelland Field of the San Andres formation, is held by production (“HBP”). Initial reservoir modeling indicates that there are more than 45 potential horizontal well locations based on the amount of acreage acquired with this acquisition which provides for approximately four laterals for every 640 acre spacing unit. Under terms of the agreement, Energy Hunter Resources, along with certain institutional investors, acquired the properties from an undisclosed seller in a cash and stock transaction with a total enterprise value of $20 million (as adjusted).
- Approximately 9,413 net acres located in Cochran County, Texas
- Low acquisition cost of $2,250 per acre
- 100% of the acreage block is held by existing production (vertical wells)
- Current gross production of approximately 72 BOE per day (vertical wells)
- The San Andres formation is part of the Northwestern Shelf of the Permian Basin
- More than 45 identified horizontal drilling locations and approximately 20 recompletion opportunities
- 60% WI / 47% NRI (EHR Ownership)
- Significant existing infrastructure including approximately 160 wells, power generation and electrical lines, salt water disposal wells, injection lines, surface pumps, tank batteries, pumping units, etc.
- 90% oil cut
Gary C. Evans, Chairman and Chief Executive Officer of Energy Hunter Resources said, “The closing of our first San Andres acquisition positions our Company in one of the lowest cost and most economic oil plays in the United States today. Since we first announced this potential acquisition during the summer, we have subsequently seen a significant increase in operational activity in the play from both public and private companies, as well as a substantial increase in WTI oil prices from approximately $48 per barrel to the current price of $58 per barrel. While the play is economic down to $25 per barrel, current strip prices peg internal rates of return on our acreage at well over 100%. Our current plan is to drill a minimum of six wells per year on this acreage and engage in multiple low cost recompletion opportunities in order to drive additional production growth.”
Evans continued, “In addition to the 9,413 net acres acquired in Cochran County, Texas, the acquisition also included approximately $5 million of infrastructure that contains more than 160 wells, production facilities, oil and natural gas gathering lines, injection pumps, power stations and electricity lines and salt water disposal wells (“SWD”). This existing infrastructure is very important not only for the inherent value that it represents, but also because it enables us to immediately begin production sales upon completion of each new horizontal well drilled without having to engage in untimely delays and additional capital costs waiting on third parties. As part of this transaction, the Company also obtained the exclusive right to acquire an additional 9,600 net acres of San Andres leases located in Cochran County, Texas and adjacent to these properties acquired last week. This exclusive right expires in late January 2018. Our management team is continuing to explore additional opportunities for growth both organically and through acquisitions throughout this San Andres play.