Permian Basin-focused independent Earthstone Energy Inc. said Monday it would boost its footprint in the area with a $73.2 million acquisition.
The company is buying the assets in the Midland sub-basin from two undisclosed sellers for a mix of stock and $49.2 million in cash. The deal is expected to close in the middle of 4Q2021 with an effective date of July 1.
The properties to be acquired include 10,000 operated acres in Irion County, TX, and produced 4,400 boe/d in September. Output was 26% oil and 52% liquids, Earthstone said. Reserves include about 13.3 million boe, 58% of which is natural gas, 31% natural gas liquids, and 11% oil.
“The acquisition of these low-operating cost, high-margin, producing assets at an attractive valuation is a nice addition to our production and cash flow base,” CEO Robert Anderson said. “We expect to benefit from additional operating synergies when production operations are combined with other assets in the area. As we have done in prior acquisitions, we look forward to applying our operating approach to these assets in order to reduce costs and maximize production and cash flows.”
The deal is Earthstone’s fourth this year, Anderson said, adding that the Woodlands-based company may continue consolidation efforts.
Earthstone plans to fund the cash portion of the purchase with cash on hand and borrowings under its revolving credit facility, which currently has a borrowing base of $650 million. On Aug. 31, Earthstone had about $1.2 million in cash and about $363.4 million remained undrawn on its revolver.
The bolt-on transaction comes amid a flurry of deals in the Permian. ConocoPhillips recently announced it would acquire Royal Dutch Shell plc’s portfolio in the basin for $9.5 billion. Last week, Cimarex Energy Co. completed its merger with Cabot Oil & Gas Corp., linking its Permian and Oklahoma assets with Cabot’s Marcellus footprint. And earlier this year, fellow Permian pure play Pioneer Natural Resources Co. announced it would acquire privately held DoublePoint Energy LLC. Elsewhere, Southwestern Energy Co. has announced plans to take over Indigo Natural Resources
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