Earthstone Energy Inc. of The Woodlands, TX, has agreed to acquire Lynden Energy Corp. in an all-stock deal, giving it entry into the Permian Basin. The combined company will also be focused on the Eagle Ford and Bakken shales.
"We will diversify our asset base and move into attractive acreage with significant horizontal potential in the Midland Basin," said Earthstone CEO Frank A. Lodzinski. "We will also broaden our shareholder base through this all-stock deal.
"...[I]n our prior public company, GeoResources Inc., we initially entered the Bakken Shale play in the Williston Basin on a non-operated basis with another excellent operator and quickly established an operating presence thereafter. We intend to expand our presence in West Texas and pursue operated properties and acreage as our management team has done in each of our four prior public companies."
Lynden's primary assets include 14,765 gross (5,883 net) acres in the core Midland Basin counties of Glasscock, Midland, Martin and Howard in Texas; working interests in 107 gross (43.8 net) vertical producing Wolfberry wells; working interests in two gross (0.9 net) recently drilled horizontal Wolfcamp wells in Glasscock County; working interests in two gross (0.4 net) horizontal wells in Martin County (one gross Lower Spraberry well and one gross Wolfcamp well).
Additionally, the deal adds to Earthstone more than 150 proved gross vertical Wolfberry locations on 20- to 40-acre spacing, with potential for 50 gross horizontal Wolfcamp A and B wells. There is additional upside in the expanding horizontal Spraberry trend, multiple benches of the Wolfcamp, and the Cline Shale, Earthstone said. And there is further upside in 104,000 gross (52,000 net) acres in a single contiguous lease on the eastern shelf of the Permian in Coke, Mitchell and Sterling counties, TX.
Production from the assets being acquired is 1,450 boe/d (53% oil, 77% liquids). As of June 30, proved reserves totaled 13.4 million boe (34% proved developed; 50% oil, 76% liquids).
Earthstone's most significant current assets are in the Eagle Ford Shale. Production of the combined company is expected to be about 6,100, boe/d. The company also has about 5,700 net core acres predominantly in McKenzie and Dunn Counties in North Dakota that are being developed in the Bakken and Three Forks formations.
The acquirer will issue 3.7 million shares of its common stock to Lynden shareholders, which will represent about 21% of Earthstone outstanding common shares following the closing. Consideration comes out to about 52 cents per Lynden share based on Earthstone's Wednesday closing price. After closing, stockholders of Earthstone and Lynden are expected to own 79% and 21%, respectively, of the combined company on a fully diluted basis.
"The business combination allows Lynden's stockholders to combine with and realize the benefits of a much larger company driven by an experienced management team that has a successful track record in several prior public companies," said Lynden CEO Colin Watt.