Carrizo Oil and Gas Inc. (NASDAQ: CRZO) announced on Aug. 14 that it has acquired Delaware Basin acreage from Devon Energy Corp. (NYSE: DVN) for $215 million cash, which remains subject to customary closing adjustments.
The 9,600 net-acre-deal increases Carrizo’s Delaware Basin acreage position to 46,000 net acres including 26,300 net acres in its Phantom area.
“This acquisition is an excellent fit with our existing Phantom-area acreage and meaningfully increases our scale in the area,” Carrizo president and CEO S.P. “Chip” Johnson IV said in a released statement. “The acquisition materially increases our inventory of derisked drilling locations in the area as well as offers significant upside potential from delineating the entire position and testing additional zones.”
“The acreage also has a high degree of operational control and minimal near-term drilling obligations,” Johnson continued. “As a result, we expect to seamlessly integrate these assets into our existing development plan for the area, which currently assumes a ramp-up in activity in the second half of 2019 as Permian pipeline takeaway is forecast to increase.”
Net production from these properties is approximately 2,500 barrels of oil equivalent per day (boe/d). The transaction is expected to close in fourth-quarter 2018.
The proceeds from this acquisition bring Devon’s divestiture program to $4.4 billion. To help fund the acquisition, Carrizo is launching a public offering of 9.5 million common shares.
“Over time, we see the potential to achieve meaningful efficiencies through optimizing future large-scale pad development, drilling longer-lateral wells, and integrating the existing infrastructure within our system,” Johnson said.
Highlights of the deal include:
- About 10,600 gross (9,600 net) acres located in the Delaware Basin in Reeves and Ward counties, with the majority of the position adjacent to the company’s existing acreage;
- High degree of operational control with more than 90% of net acreage operated;
- Minimal near-term drilling obligations as 94% of the acreage is HBP;
- Low average royalty of about 20%;
- Net production of about 2,500 boe/d (60% oil) ;
- More than 100 net potential derisked drilling locations identified across the Wolfcamp A and B based on 7,000-ft laterals, with significant upside potential from additional zones, further delineation, and future downspacing;
- Includes salt-water disposal wells that can be integrated into the company’s system; and
- Significant opportunities to generate efficiencies from increased scale, extension of lateral lengths, and integration of infrastructure.
Terrance Harris can reached at email@example.com
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