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Jones Energy Adds to Anadarko Basin Assets

Jones Energy Inc. has agreed with an undisclosed private company to acquire both producing and undeveloped oil and gas assets in the Anadarko Basin for $195 million.

The deal is expected to close in late December and be immediately accretive to cash flow and earnings, Jones Energy said.

The assets acquired include about 26,000 net acres in the Cleveland, Tonkawa and Marmaton plays in the Texas Panhandle and western Oklahoma. Included in the deal are 225 drilling locations the company identified as “high-quality," with 185 of those in the Cleveland play, where the company has been particularly active.

Those assets will boost Jones Energy's identified Cleveland drilling locations to more than 680, which it estimates will provide more than seven years of drilling in the formation at its current pace using eight rigs.

In all, the acquisition will add proved reserves of 14.3 million boe and 92 producing wells with a net production of 3,400 boe/d, which the company said consists of 54% liquids. More than 90% of the acreage acquired is held by production.

"This transaction increases our inventory of drilling locations in one of our core operating areas at an attractive valuation, providing us with increased visibility and sustainability of growth in this productive area," said CEO Jonny Jones. "We are acquiring appealing assets in the heart of the liquids-rich fairway of our Cleveland play, where we have operated for over 25 years and drilled over 300 horizontal wells."

The 185 wells Jones Energy acquired in the deal are in a part of the Cleveland where the company says its costs are “best in class." Jones said he "expects these wells to deliver the same high returns as those drilled in our existing Cleveland acreage."

Also on Monday, the company confirmed it will move forward with its previously announced plans to test the Tonkawa during the first half of 2014, adding that the acquisition will mean the addition of two rigs to accelerate overall development and boost its rig count from 10 to 12 next year.

In a research note to clients on Tuesday, analysts at Wells Fargo Securities wrote that they "believe the acquisition is a positive for the company as it adds both production visibility and inventory in the company's highest-return asset."

They added, however, that the move offsets a $14.4 million noncash charge and the loss of 15.5 million boe associated with an offer that was recently rejected by Jones Energy partner Southridge, after Jones expressed an interest in acquiring a portion of Southridge's assets in the Woodford Shale play.

Austin-based Jones Energy is traded on the New York Stock Exchange, where shares closed at $13.87 Monday. Analysts at Wells Fargo said the company saw a steep sell-off in shares after it lost the Southridge deal, but they added that the extra inventory from the acquisition and better economics in the Cleveland will likely overshadow the loss.

Shares of Jones Energy were up in midday trading on Tuesday.

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