Colgate Energy Continues Permian Expansion with $190 Million New Mexico Bolt-on

Colgate Energy Partners III LLC entered a definitive agreement with an undisclosed seller on Nov. 7 to purchase approximately 22,000 net acres directly offset Colgate’s existing position in New Mexico’s Eddy and Lea counties for $190 million.

“Given the depth of our current inventory, we have a very high bar for acquisitions and this one was just too good to pass up,” Will Hickey, co-CEO of Colgate, commented in a company release.

The deal marks the third acquisition for privately held Colgate Energy so far this year. Previously, the company completed two acquisitions in the southern Delaware Basin in West Texas—first, with its all-stock acquisition of Luxe Energy followed by a $508 million cash acquisition of acreage in Reeves and Ward counties, Texas, from Occidental Petroleum Corp.

“Building on the transformative transactions completed earlier this year in Texas, this New Mexico acquisition adds to Colgate’s position as one of the premier private operators in the Permian Basin,” James Walter, co-CEO of Colgate, said in the release.

Based in Midland, Texas, Colgate Energy was founded in 2015 by Walter and Hickey with initial equity commitments from Pearl Energy Investments and NGP. Pro forma for the Nov. 7 deal, Colgate’s position in the Permian Basin will cover roughly 108,000 net acres with estimated current net daily production of 62,000 boe/d.

In his statement, Hickey also noted that the latest acquisition directly offsets its legacy Parkway operating area in the Northern Delaware Basin where Colgate has recently drilled some of the best wells in company history.

The acquisition adds over 200 “high-quality locations,” according to the company release.

The acquired acreage has an average 8/8ths net revenue interest of over 80% and is over 95% operated with a 78% average working interest. Current estimated average net daily production from the assets is roughly 750 boe/d.

Colgate expects to finance the acquisition through a combination of cash on hand, borrowings on its revolver and/or other potential debt financing.

“Colgate’s strong balance sheet and ample liquidity allows us to execute a cash transaction of this size while continuing to target 2022 leverage of less than 1.0x,” Walter added.

The effective date of the transaction is Sept. 1, and closing is expected to occur in first-quarter 2022.