W&T Offshore Inc. is selling its Yellow Rose field interests in the Permian Basin to recently formed Ajax Resources LLC for $376.1 million. Proceeds will go toward paying down debt and supporting liquidity in anticipation of opportunistic acquisitions offshore, W&T said.
Houston-based W&T reserved a 1-4% sliding scale overriding royalty interest in the field. The deal is expected to close during the third quarter with an effective date of Jan. 1, 2015. W&T's interest includes 25,800 net acres in Andrews, Martin, Gaines and Dawson counties in West Texas. During July, Yellow Rose net production averaged 3,000 boe/d.
The acreage position is about 90% held by production with substantial in-place infrastructure to support operations, according to Ajax. "Significant resource potential exists through multiple stacked pay horizontal drilling zones, and Ajax will benefit from extensive well control with over 200 vertical and horizontal wells drilled and currently producing across the property," the company said.
"This sale will allow us to strengthen our balance sheet and improve our financial flexibility to pursue the acquisition of Gulf of Mexico assets while valuations are favorable," said W&T CEO Tracy Krohn. "We believe that current conditions are good for W&T to identify quality offshore producing assets that offer upside exploration and development opportunity. "
W&T is active offshore in the Gulf of Mexico and holds working interests in about 60 offshore fields in federal and state waters. The company has under lease 1 million gross acres offshore, including about 0.6 million gross acres on the Gulf of Mexico Shelf, approximately 0.4 million gross acres in the deepwater, and about 50,000 gross acres onshore, primarily in Texas.
Ajax was formed with private equity backing from Kelso & Company in order to acquire the W&T acreage. "This investment positions us with a substantial acreage footprint in one of the most prolific and low-cost oil basins in the U.S.," said Ajax Chairman Forrest Wylie.
Wylie has 26 years of experience in the energy sector, working for public exploration and production, offshore drilling, energy marketing and midstream businesses, and has served as CEO, chairman or board member for multiple Kelso portfolio companies over the past 12 years. Ajax CEO Harvey Klingensmith has more than 40 years of operating experience in the oil and gas industry, and has drilled more than 800 wells over the course of his career.
Over the last 12 years, Kelso has invested more than $2 billion in the energy sector, including in companies such as Venari Resources, Tallgrass Development, Hunt Marcellus, Buckeye Partners, CVR Energy and Optigas.