Warren Resources Inc. said Monday that it had acquired all of Colorado-based Citrus Energy Corp.'s Marcellus Shale assets in northeast Pennsylvania in a $352.5 million deal that will find privately-held Citrus folding into Warren's operations.
The acquisition gives Warren -- a company focused on waterflood oil recovery in California and coalbed methane in the Rocky Mountain region -- entry into a de-risked portion of the unconventional Marcellus Shale, where Citrus has drilled horizontal wells in close proximity to midstream infrastructure. Warren will acquire more than 26,000 gross acres in Wyoming County, PA.
Citrus was founded in 1989 and has since focused on property acquisitions and drilling programs in a number of states, including most recently in Texas and Oklahoma, where it is no longer active. The company's Pennsylvania holdings were its last significant assets and co-founder Lance Peterson will join Warren's board of directors as part of the deal.
Some of Citrus' key personnel will join Warren's operations to form a unit for Marcellus operations. The assets are located in a prolific dry-gas region where larger independents have reported strong results.
Warren said the acreage is currently producing 82 MMcf/d of natural gas and is estimated to hold 208.3 Bcf of proved reserves, both of which are expected to increase once further development begins.
"This acquisition provides Warren with scale and diversification into a new core basin and leverages Warren's engineering and operational expertise in exploiting known geologic resources," CEO Philip Epstein said in a statement. He added that the acreage is directly south of Cabot Oil & Gas Corp.'s Marcellus position, which has been a top producer in the region.
Warren plans to fund its acquisition by issuing $40 million in common stock and other financing such as an increase to its borrowing base and credit facility. BMO Capital Markets and Jefferies LLC served as financial advisors for Warren and Citrus respectively.