Tulsa-based independent Laredo Petroleum Inc. has added 4,475 contiguous net acres in West Texas for $65 million, helping to build its oily footprint in the Permian Basin.
The Glasscock County acreage, purchased from an undisclosed seller, is producing 1,400 boe/d net, 55% weighted to oil. It includes 35 net expected locations across the Lower Spraberry, Upper Wolfcamp and Middle Wolfcamp formations at 1,320-foot spacing; 80% of the acreage is held by production (HBP).
"This acquisition expands our Glasscock County position further to the west into an area of higher oil productivity than our established acreage position,” CEO Jason Pigott said. “We expect to incorporate this acreage into our drilling plan to meet HBP obligations in 2020 and 2021,” allowing Laredo to transition to full development once the company completes a development plan in nearby Howard County.
During the 3Q2019 conference call last month, Pigott said Laredo had a $130 million agreement with an undisclosed seller to add a 96%-operated leasehold in Howard County. The deal, set to be completed by year’s end, includes 750 net royalty acres.
The Howard County acreage already has offset development activity, weighted around 80% to oil in the first year of production. The first-year oil productivity also is 55% higher than expectations for legacy Laredo drilling in the Wolfcamp formation and 20% higher than in its Cline program, management said.
Laredo expects to develop 100 net drilling locations in early 2020 to target the Lower Spaberry, as well as the Upper and Middle Wolfcamp. Additionally, third-party oil, gas and processed water infrastructure is in place, which should limit the need for upfront capital expenditures.
"This acquisition enhances our ability to generate combined high-single digit oil growth and free cash flow through 2022," Pigott said of the Glasscock purchase. "We remain committed to maintaining a competitive leverage ratio and expect to utilize our free cash flow to pay down our revolver as we pursue a disciplined, accretive acquisition strategy."