Sundance Energy Australia Ltd. is picking up Texas acreage prospective for the Eagle Ford Shale and for the Georgetown Formation and has sold its acreage in the Denver-Julesburg (DJ) Basin in order to refocus capital on core areas, the company said.
The company is buying 9,200 gross (5,500 net) mineral acres in Dimmit County (60% working interest) and 18,000 gross (5,500 net) mineral acres in Maverick County (30% working interest).
The purchase price includes an upfront payment of US$33.0 million and a commitment to drill four gross Eagle Ford wells. Sundance anticipates redeploying one of its rigs from its McMullen County, TX, area to the acquired acreage in the third quarter. Sundance does not anticipate updating its 2014 calendar year capital expenditure or production forecast for this acquisition.
The deal grows the company's Eagle Ford position to about 19,500 net acres covering approximately 295 gross (196 net) drilling locations. It adds approximately 115 gross (69 net) locations to Sundance's Eagle Ford drilling inventory and about 200 boe/d of production. Nearby operators include Anadarko Petroleum Corp., Chesapeake Energy Corp. and Newfield Exploration Co., Sundance Managing Director Eric McCrady said during a conference call to discuss the transaction.
"We are very excited to add a second core Eagle Ford area to our development inventory," McCrady said. "Dimmit County has seen significant activity and strong results from some of the leading Eagle Ford operators such as Anadarko [Petroleum]. This acquisition of 5,500 net, contiguous acres provides an attractive expansion to Sundance's current company-operated, high-working-interest Eagle Ford drilling inventory.
"Assuming the project is developed using 5,500 foot laterals, the company anticipates well costs under $6.5 million per well with reserves of 350,000 boe, of which 55-60% is expected to be oil. There is significant upside to reserves and returns per well because the lease configuration provides for completed lateral length over 5,500 feet."
Closing is expected in late June or early July.
Sundance has a one-year option to acquire the seller's remaining 40% working interest in the Dimmit County project and 20% working interest in the Maverick County project, including its interest in producing wells, for US$45.0 million.
The DJ Basin assets are being sold to a private-equity backed oil and gas company for US$116 million, which includes capital expenditure reimbursement on eight gross (3.1 net) nonoperated horizontal wells in the Wattenberg Field. The assets include 5,100 net acres in the Wattenberg plus Sundance's remaining northern Niobrara projects: Twister, Bull Canyon and Silo. The assets produced about 567 boe/d during the first quarter.
"This sale of a noncore project allows the company to not only crystallize an attractive return on its DJ Basin investment, but provides a significant opportunity to reinvest capital into accelerating growth in our core projects in the Eagle Ford and Mississippian/Woodford," McCrady said.
"The cash consideration from the sale significantly bolsters Sundance's funding capacity to accelerate value creation in existing projects and pursue new value-accretive project acquisition opportunities...This strategy will enable Sundance to focus its growth in the Eagle Ford and Mississippian/Woodford, two of the highest return onshore U.S. resource plays."