Houston-based Evolution Petroleum Corp. is set to enter the Barnett Shale in North Texas with the acquisition of 23,000 net acres from Tokyo Gas Americas Ltd.

Evolution Petroleum logo

Evolution said Wednesday it would pay $23.25 million for the nonoperated position, which currently produces about 22 MMcf/d of natural gas and 13,000 b/d of liquids. In percentage terms, 70% of the production to be acquired is gas and 30% is liquids. Blackbeard Operating LLC, which is backed by private equity firm NGP, is operator of a majority of the assets.

Evolution CEO Jason Brown said the deal would amount to a 75% increase to the company’s current production.

“This acquisition significantly adds to our overall production and reserves, representing a material step in growing our business without adding incremental general and administrative expenses,” Brown said.

The deal is expected to close in April.

Evolution had been monitoring the Barnett and had seen “significant improvement” in midstream infrastructure costs over the past 18 months, Brown said. He also noted that many operators had switched from a Waha Hub price basis to an East Texas or Houston Ship Channel basis, leading to better realized prices.

“These two factors along with the maturity of the basin, demonstrated by relative low production declines, makes the Barnett a complementary addition to support our long-term business strategy,” he said. The company also has holdings in a carbon dioxide enhanced oil recovery project in Louisiana’s Delhi field and a secondary recovery project in Wyoming’s Hamilton Dome field.

The sale follows steps taken by Tokyo Gas last year to boost its stake to 70% from 46% in Haynesville Shale-focused Castleton Resources LLC. Japan’s largest supplier of city gas has worked over the years to build up its North American holdings. In addition to the Haynesville asset, it held about 130,000 net acres in the Barnett prior to the Evolution deal and another 34,000 net acres in the Eagle Ford Shale.The company also has power generation assets in North America, along with liquefied natural gas (LNG) tolling capacity at the Cove Point LNG export terminal in Maryland. It has an agreement in place for capacity at the Energia Costa Azul LNG export project under development in Baja California in Mexico.