Houston-based Lucas Energy Inc. is entering the Midcontinent by acquiring working interests in producing properties and undeveloped acreage, mainly in Central Oklahoma's Hunton formation, in a cash, debt and equity deal. The company plans to rebrand itself as Camber Energy Inc. following completion of the acquisition. Shares soared on the news Thursday.
Lucas is acquiring the assets from 21 different entities/individuals. The assets include varied interests in two largely contiguous acreage blocks in the liquids-rich Midcontinent region, the company said Thursday. The properties currently produce more than 1,200 net boe/d, of which 53% are liquids, from 114 producing wells.
The bulk of the production is from the Hunton -- about 43,000 gross acres (9,900 net acres) in central Oklahoma. Offset development drilling opportunities for at least 40 additional wells have been identified. Total proved developed reserves (PDP) are estimated at 5.4 million boe, comprised of 6% oil, 47% natural gas liquids (NGL) and 47% natural gas.
Lucas shares more than doubled in early trading Thursday, climbing more than 160% to trade around $4.30. The stock's 52-week range is $1.33 to $11.25.
Lucas said it will assume $31.35 million in commercial bank debt, issue 552,000 shares of convertible preferred stock, issue 13,009,664 shares of common stock, and pay nearly $4.98 million in cash. After closing, Lucas will become Camber Energy.
"There are no significant management changes planned at this time as Anthony C. Schnur will maintain his role as president and chief executive officer of the company," Lucas said. "However, the sellers will have the right to appoint three members to the board of directors at closing, including Richard N. Azar II."
Azar is the principal seller and manager of the properties and will be appointed executive chairman of Camber. He is a founding partner of Segundo Resources, representative of the sellers, and for more than 20 years has been active in developing the Hunton resource play in Central Oklahoma through his direction of Segundo, ownership in Altex Resources Inc., and various other oil and gas ventures.
Lucas has been active in the Austin Chalk and Eagle Ford Shale in Texas. Before striking the Midcontinent deal, Lucas transferred its existing oil/gas assets, as well as senior debt obligations, to a wholly-owned special purpose vehicle (SPV) that is non-recourse to Lucas. The company's senior lender will keep its rights to the assets of the SPV. "This restructuring allowed Lucas the ability to enter into the acquisition agreement described above in order to pursue its strategic objective of adding significant production and increasing the scope and scale of the company," the company said.
In spring 2015 Lucas and Victor Energy Corp. scrapped their plans to merge, and Schnur said the company would look for deals with others (see Shale Daily, May 18, 2015).
"The completion of this transaction will raise the trajectory of opportunities for Lucas, not only as we increase our existing production base and future development opportunities, but also as we expand our reach into a key play in the Midcontinent and broaden our strategic horizons," Schnur said. "We are extremely excited to have identified an acquisition that provides us with stable, long-lived reserves with substantial current production and ample drilling opportunities that are economic in a prolonged depressed commodity price environment."
The deal is subject to customary conditions, as well as the company's ability to fund the cash portion of the deal through a commercial bank facility; obtain necessary shareholder approvals; obtain the consent of creditors of the sellers; as well as maintain its listing on the New York Stock Exchange. Closing is targeted for the first quarter.