Tulsa-based Unit Corp.'s exploration unit has agreed to trade cash and some acreage for more property in a core operating area of Western Oklahoma.
Unit Petroleum Co. is acquiring assets from an undisclosed seller in Grady and Caddo counties. It agreed to pay $57 million and trade 180 net acres in McClain County.
The acquisition would 8,300 net acres, 71% held by production, to Unit's Hoxbar formation area in southwestern Oklahoma. The purchase includes 47 producing wells, 23 operated by the seller and 20 by Unit, as well as a small gathering system. Estimated proved reserves are 3.2 million boe with production averaging 1,367 boe/d and 73% weighted to liquids. There are 65 gross potential horizontal drilling locations.
"This is an important growth step for Unit and represents an advantageous addition in one of our core areas that we have been working to expand," said CEO Larry D. Pinkston. "For our upstream business segment, it will increase our Hoxbar total core area position to approximately 28,000 net acres and increase our working interest in many sections."
The Hoxbar acreage is adjacent to the Norge Marchand Waterflood Unit, where Unit's wells have average estimated ultimate recovery of more than 500,000 boe.
"We plan to pick up a rig in the second quarter to continue developing the area," Pinkston said. "Coupled with the waterflood potential, we believe the value of this core holding will be significantly enhanced."
The acquisition provides operational control to key areas of the Marchand zone of the Hoxbar reservoir for secondary recovery efforts, which has the potential to significantly increase the production from the existing wells, management said. The initial secondary recovery phase is expected to increase the reserve potential from the Marchand interval by "at least" 500,000 boe per well.
On Tuesday Unit also entered into a distribution agreement with Raymond James & Associates Inc. to sell up to $100 million worth of stock. Actual sales will depend on factors to be determined by Unit, with any net proceeds used to fund or offset the costs of acquisitions, future capital expenditures and to repay debt.