Resolute Energy Corp. is boosting its holdings in the Permian Basin's Delaware formation after agreeing to pay $135 million for close to 3,300 net acres in Reeves County, TX.
The agreement announced Wednesday with EnCap Investments portfolio company FireWheel Energy LLC consists of 3,293 acres and include interests in 13 horizontal and 15 vertical wells, which produce 1,200 boe/d net. Nearly all (95%) of the acreage and substantially all of the production and proved reserves are within the Resolute-operated Mustang project area in Reeves County, where the operator is pouring more resources (see Shale Daily, July 8). The remainder of the acreage is also in Reeves County.
"Our Mustang project area, covering more than 12,400 gross acres, is one of our two concentrated acreage positions in the Delaware Basin," CEO Nicholas J. Sutton said. "This transaction allows us to add acreage, production and opportunity without either the uncertainty associated with acquiring more speculative acreage or adding to our staffing and infrastructure needs.
"We believe that the Firewheel acquisition is exactly the kind of targeted, focused, consolidating opportunity that leverages the strengths of our team and our assets."
The acreage represents 25% increase to Resolute's net acreage in Reeves County, where it now holds 16,450 net acres.
The Delaware properties hold estimated proved reserves of 6.2 million boe. Resolute put the present value (PV) of future revenues, minus anticipated expenses using a yearly discount rate of 10%, aka PV-10, at $45.8 million, using strip pricing at June 30. The acquisition also includes Firewheel's interest in an earn-out agreement, to which Resolute is a party, with Caprock Permian Processing LLC and Caprock Field Services LLC. Once the acquisition is completed, set for Friday, Resolute would receive 100% of all payments from Caprock.
Resolute agreed to pay FireWheel $90 million in cash and issue 2.2 million-plus shares, equal to $45 million, based on 90% of the volume-weighted average price traded on the New York Stock Exchange for the 15 trading days ending Tuesday (Oct. 4).
FireWheel, formed by EnCap in 2011 and headquartered in Midland, TX, is focused on the Permian and East Texas. Most of Firewheel’s senior management team held executive positions with ExxonMobil Corp.'s XTO Energy Inc. subsidiary.