Expanding its assets in an area of its primary focus, Midland, TX-based Legacy Reserves LP said Wednesday it has agreed with Concho Resources Inc. to buy $520 million of Concho’s holdings in the Permian Basin. Legacy said it hopes to close the deal before the end of this year.
Legacy is estimating the new assets will add $80 million in cash flow to its operations next year.
With estimated proved reserves at 25.6 million boe, Legacy said it intends to finance the deal through a combination of new public equity offering and borrowings under an existing revolving credit facility, or subject to market conditions, the use of private and public debt securities.
Proved reserves from Concho are approximately 90.5% operated, Legacy said. The reserves are estimated to be 62% oil and the rest natural gas. There are 1,584 producing wells in the deal, with the potential for an estimated output of 5,238 boe/d during the first three months of 2013.
Calling it a “landmark acquisition,” Legacy CEO Cary Brown said the Concho assets are in “some of the most prolific fields in the Permian,” and they include reserves that are mostly all producing now. Brown said that “because the assets are essentially in our backyard, we expect to benefit from our operation expertise and existing field-level infrastructure.”
A year ago, Legacy drew attention when it backed out of a deal to buy some of Encana Corp.’s natural gas assets in Wyoming in the face of a federal/state groundwater well pollution investigation (see Daily GPI, Nov. 30, 2011). It had agreed to pay Encana $45 million in cash for some of the Calgary operator’s properties in the Pavillion, WY, area.
Legacy has calculated a proved reserves-to-production ratio for the Concho assets at 13.4 years. All of the reserves are in counties in which Legacy already has operations or adjacent to where it is operating. All but less than 1% of the reserves are in the Permian.
“[There is] significant geographic overlap,” said a Legacy spokesperson, adding that this “leverages operational expertise” and existing field-level infrastructure that the company already has in place. “Acreage associated with the acquisition is expected to support substantial long-term development potential, including 236 currently identified development locations.”
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