Memorial Resource Development Corp. (MRD) in separate deals is acquiring or leasing acreage adjacent to its North Louisiana operating areas in the Cotton Valley Sands formation's Terryville Complex.
Through a purchase and sale agreement the company is acquiring acreage in Jackson and Lincoln parishes, and through an acreage option agreement, Houston-based MRD is leasing acreage in Bienville, Claiborne, Jackson and Lincoln parishes. Since the start of this year, MRD has gained access to 132,758 net acres in North Louisiana for about $373.8 million.
"These transactions are consistent with our strategy of expanding our already industry-leading position in North Louisiana," said CEO John Weinzierl. "Based on our technical expertise, we believe the additional acreage will provide us additional opportunities to grow our inventory of over-pressured, horizontal, Lower Cotton Valley drilling projects."
As of Sept. 21 and including the latest transactions, MRD has 215,771 gross (193,915 net) acres in and around the Terryville Field, which represents a 276% increase in net acres since its initial public offering (IPO) in June 2014 (see Daily GPI, July 8, 2014; June 13, 2014).
The latest acreage purchase is of 45,807 gross (45,121 net) acres and is expected to close in the fourth quarter with an effective date of Aug. 1, 2015.
The acquisition properties are located southeast of MRD's current position in Terryville Field, in southern Lincoln and northern Jackson parishes. "The reservoirs contain over-pressured, multi-stacked pays exhibiting many similar geological characteristics found in Terryville Field including depositional environment, sediment source, lithology and depth," the company said.
"Additionally, the acquisition properties contain both over-pressured Upper Red and Lower Red pay intervals each ranging from 350 to 1,000 feet in thickness with equivalent pressure gradients and reservoir quality compared to Terryville Field. The acquisition properties also represent a highly contiguous acreage position in North Louisiana that is largely operated, which MRD believes makes it an excellent candidate for horizontal development."
The recently signed acreage option agreement gives MRD the right to lease up to 39,619 net acres in Bienville, Claiborne, Jackson and Lincoln parishes from an undisclosed lessor. The option is exercisable through February 2017. If exercised, the option leases will be under primary term for up to four years after the option election date and carry additional extension provisions.
MRD said it has turned eight new well pads to sales during the third quarter. These included 22 gross wells consisting of 17 Upper Red, four Lower Red and one Upper Deep Pink wells, which is in line with previous guidance. MRD said it expects to bring on line 40-45 gross wells during 2015. As of Sept. 15, MRD had a 79 horizontal wells producing from its four primary zones in the Terryville Field.
On Sept. 10, MRD completed the one-well Dowling (27-34-HC-1) pad targeting the Upper Red zone located 7,620 feet northwest of the Louisiana Methodist Orphanage 2-11 HC-1 (LMO) well. "Initial flowback gas rates are encouraging as the well has reported a 40.7 MMcfe/d peak 24-hour IP [initial production] rate, which represents the best peak 24-hour rate drilled in the field to-date," MRD said.
On Aug. 20, MRD completed the two-well Bellevue Timber pad targeting the Upper Red zone with laterals spaced 775 feet apart. The Bellevue Timber 16 9HC-1 single-well achieved a peak 24-hour rate of 40.1 MMcfe/d, which represents the second-best peak 24-hour rate drilled in the field to-date, MRD said. As of Sept., the two-well pad has achieved a combined 24-day IP rate of 61.8 MMcfe/d.
MRD also announced an equity offering of 12 million shares of common stock at $17.60/share, an increase from the original plan to offer 10.25 million shares. Proceeds are to be used to fund the North Louisiana acquisition.
As of June 30, MRD had $560 million of available borrowing capacity. Proforma for the acquisition expected to close in the fourth quarter and a recent mid-year redetermination that raised the company's borrowing base under its revolver to $1 billion, MRD expects to have more than $550 million of available borrowing capacity. "Following the close of that acquisition, MRD's liquidity position is expected to be sufficient to finance anticipated working capital and capital expenditure requirements," the company said.