Midland Basin Acquisition | Russell T. Rudy Energy LLC
“Rigzone” reports that SM Energy will buy Rock Oil Holdings LLC from Riverstone Holdings for $980 million. The transaction will almost double the purchaser’s Permian Basin footprint to about 46,750 net acres with 4,900 barrels of oil equivalent per day (boepd) net production and 6 million barrels of proved developed producing reserves. The acreage is mostly contiguous with SM’s existing assets. The acreage in Howard County is part of the Midland Basin of West Texas which is a top tier area in terms of well performance. Closing is scheduled for October 4, retroactive to September 1. SM will pay for the purchase with the proceeds from the sale of 15 million shares of common stock and a $100 million debt offering.
Stiffel Research notes that while the purchase price is not cheap, it is comparable to recent transactions and makes sense for SM, given its recent success in the Sweetie Peck play in the area.
The energy investment banking firm Tudor, Pickering and Holt, acknowledges that the Permian Basin is at the top of investors’ buy lists and goes on to say, “Although we believe other basins will see an eventual recovery, the Permian stands out with respect to its advantaged attributes-areal extent, multi-zone serendipity, rate of change with respect to both costs and well performance, crude oil leverage and lack of regulatory headwinds.”
SM plans to run one rig in the area during the fourth quarter, and two throughout 2017. The operator anticipates an additional capital program of $15-20 million this year using pad drilling, reservoir modeling, zipper fracs, and leading edge completion techniques.
To read the article in its entirety, please go to http://www.rigzone.com/news/oil_gas/a/146072/Acquisition .
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