Vanguard Natural Resources LLC has agreed to acquire Cotton Valley formation natural gas, oil and natural gas liquids (NGL) assets in North Louisiana and East Texas for $278 million from Hunt Oil Co.
The properties consist of 23,000 net acres that are currently producing 17.5 MMcfe/d (67% natural gas and 33% oil and NGLs). The effective date of the acquisition is June 1, 2014 and closing is expected by Oct. 1. The deal will be funded with borrowing under an existing credit facility.
"Along with an established base of producing assets, this acquisition features an inventory of behind-pipe and low-risk vertical drilling projects that we will begin to develop in 2015," said Vanguard CEO Scott Smith. "In addition, based on our initial evaluation work, we believe there is the potential for meaningful horizontal drilling opportunities across some of the operated assets. With this transaction, we have established another core area from which we can continue to build upon in the future."
The acquisition is immediately accretive to distributable cash flow, Houston-based Vanguard said, and the assets have an estimated reserve life of more than 23 years based on estimated proved reserves of 150 Bcfe (106 Bcf gas, 5 million bbl of oil, 2.3 million bbl of NGLs), 57% proved developed.
The company is acquiring working interest in more than 290 producing wells and 78 proved undeveloped vertical drilling locations. The assets have a proved developed production average decline rate of 10%. Lease operating expense costs are forecasted to average $1.00/Mcfe over the next three years and production taxes are forecasted to be 7.75% of revenue.
Vanguard's assets consist of producing and non-producing oil and natural gas reserves in the Green River Basin in Wyoming, the Arkoma Basin in Arkansas and Oklahoma, the Permian Basin in West Texas and New Mexico, the Big Horn Basin in Wyoming and Montana, the Piceance Basin in Colorado, the Gulf Coast Basin in Texas and Mississippi, the Williston Basin in North Dakota and Montana, the Wind River Basin in Wyoming and the Powder River Basin in Wyoming.
The company's second quarter earnings conference call is scheduled for Tuesday (Aug. 5).