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Parsley Stretching Out in Midland Basin

Parsley Energy Inc. is spending $252 million in multiple deals to acquire undeveloped acreage and producing properties adjacent to its operating areas in Reagan County, TX.

The Austin-based company said it is acquiring 157 net horizontal drilling locations across 5,472 net acres in Reagan County. The contiguous bolt-on acreage enables the conversion of 30 existing short-lateral drilling locations to long-lateral locations, Parsley said.

"We are thrilled to bolt-on premiere acreage that allows for longer laterals in our primary horizontal development area, where we and others are seeing very promising drilling results," said CEO Bryan Sheffield. "With facilities in place, a number of permits already secured, and our existing operations in Reagan County, we expect to realize substantial value from these assets right away."

Parsley said it believes the properties being acquired are prospective for horizontal drilling in the Wolfcamp A, B and C horizons, as well as the Cline and Atoka formations. Sellers were not disclosed. Wells Fargo Securities analyst David Tameron calculated the purchase price for the acreage at "slightly above $21,000 per acre." He said in a note that the price "appears reasonable" given the location of the acreage as well as recent deals in Martin, Midland and Glasscock counties.

The acreage being acquired also offers 140 net vertical drilling locations with 80- and 40-acre spacing and 140 net vertical locations with 20-acre spacing. Average working interest is 98%, and average royalty interest is 23%, the company said. There are nine horizontal wells in different stages of development, including three wells on one pad; two wells with production history, five recently completed wells that are flowing back, one well awaiting fracture treatment, and one well being drilled. Parsley said it intends to initiate completions on the two uncompleted wells upon closing, with the first new wells to be spud in the first quarter.

Estimated net production is about 1,800 boe/d, consisting of 300 boe/d from the two producing wells and 1,500 boe/d from the five recently completed wells. There is infrastructure in place to support ongoing horizontal drilling, Parsley said.

The acquisitions, to be funded with cash, are scheduled to close by Sept. 30. Including the latest deals, Parsley has added more than 16,000 net acres and 456 net horizontal drilling locations since its initial public offering last May (see Shale Daily, May 23).

Parsley began operations in August 2008 with the acquisition of rights to producing wells in the Midland Basin from Joe Parsley, who co-founded the Parker and Parsley Petroleum Co., which eventually became Pioneer Natural Resources. Sheffield is the son of Scott Sheffield, the CEO of Pioneer Natural Resources Co., where the younger Sheffield began his career.

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