Athlon Energy Inc. (NYSE: ATHL) entered into an agreement with undisclosed sellers to buy assets scattered in counties in the northern Midland Basin for $88 million cash, the company said Jan. 24.
The company also beat production expectations despite extreme temperatures in the Permian Basin.
The new properties total 5,656 net acres concentrated near Athlon's existing operating areas in Midland, Upton, Martin, and Andrews counties. Current production is 750 barrels of oil equivalent per day (BOE/d) with 60% oil.
New acquisitions include 250 vertical locations and 70 gross Wolfcamp A, B and Cline locations with a 72.5% average working interest, according to Athlon, based in Fort Worth, Texas.
At $65,000 per BOE/d, the company paid about $6,950 per net acre.
“A relatively low price for the Midland Basin, perhaps in part due to the package being spread across multiple counties,” said David Tameron, senior analyst for Wells Fargo Securities. “However, (the acquisition) should tie in nicely with ATHL’s existing footprint from the sounds of it.”
Athlon Deal Highlights | |
Producing wells (gross) | 70 horizontal/58 vertical |
Targets locations | Wolfcamp A/Wolfcamp B/Cline |
Average depth | 5,000 lateral feet |
Proved reserves | 2.9 MMBOE |
Interests | 82% operated/72.5% average working |
Additional wells (gross) | 250 vertical |
Athlon has added an estimated 11,000 net acres of leasehold since the time of its initial public offering, which closed in August. The company’s total acreage position currently stands at 109,000 net acres, entirely in the northern Midland Basin.
(Photo courtesy of Athlon Energy Inc.)
The acquisition will be funded with cash-on-hand and borrowings from the undrawn $525 million revolving credit facility. The sale has an effective date of Sept. 1, 2013 and is expected to close in February.
As with other Permian operators, Athlon’s production volumes across the Midland Basin were negatively impacted by severe winter weather during the fourth quarter of 2013. Nevertheless, the company delivered better than expected production for the quarter, at 14,689 BOE/d, 4.6% above Wall Street consensus of 14,560 BOE/d, said Gabriele Sorbara, an analyst with Topeka Capital Markets.
Tameron said that without the weather impact, Athlon said “it would have ‘meaningfully’ exceeded production expectations.”
The company should post official fourth quarter earnings by the first week of March.
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