A subsidiary of independent producer Parallel Petroleum Corp. has entered into an agreement with 10 unaffiliated parties to acquire 6.4 million boe of proved reserves in the Permian Basin for $44.5 million. Once completed, the transaction will raise Parallel's proved reserves by 29%.
The transaction between Parallel and undisclosed sellers includes 1.8 million boe of proved developed producing reserves and 4.6 million boe of proved undeveloped reserves (PUD). Current gross production from 35 wells is 650 boe/d, which will be 440 boe/d net to Parallel. Parallel will acquire, own and operate a 90% working interest and 67.5% net revenue interest in the properties.
The properties include 6,100 gross acres in Andrews and Gaines County, TX. About 1,300 gross acres of the total leasehold have been developed through a prior operator's drilling of the existing 35 wells. The 1,300 acres are set to be developed in "Phase 1," through infill drilling and waterflood implementation. The remaining 4,800 gross acres are expected to be field extension and lower risk exploration acreage.
Based on current evaluation and assumptions related to the properties, 23 PUD locations have been identified in the Phase 1 area, said CEO Larry C. Oldham. The drilling program is expected to begin mid-year 2006 with an investment of $10.5 million, and a waterflood program is expected to be implemented in the program by midyear 2008, he added.
With the completion of the development plan, the finding and development cost, including the initial acquisition price and the first phases of infill drilling and waterflood development, is expected to be less than $9/boe, Oldham said.
Parallel, based in Midland, TX, expects to finance the acquisition through its existing credit facility, plus an increased borrowing base associated with the properties being acquired. Several separate closings are expected to occur between mid-November and mid-January 2006. The effective date will be Nov. 1, 2005.
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