Contango Oil & Gas Co. completed its acquisition of a package of oily, low-decline assets known as Project Silvertip located in in the Big Horn, Permian, and Powder River basins, it said in a company release on Feb. 1.

The Fort Worth, Texas-based company paid $58 million in cash for the acquisition of about 182,000 net acres  across Montana, New Mexico, Texas and Wyoming. The acquisition was made via a bank-owned liquidation of assets with an undisclosed seller, according to a company release announcing the transaction in early December.

“Since signing the PSA, we have only grown more excited by the producing reserves, employees, and upside the Silvertip assets provide,” Contango CEO Wilkie S. Colyer Jr. said in a statement on Feb. 1.

The acquisition adds about 7,500 boe/d (55% liquids) of production to Contango’s portfolio in the Big Horn, Permian and Powder River basins, where the company already has existing operations.

In a previous release, Contango estimated unlevered payback period on the mature conventional assets from the Project Silvertip package to be 2.7 years at Nov. 27 strip.

Bank-owned Liquidation Asset Overview Map (Source: Contango Oil & Gas Co.)
Bank-owned Liquidation Asset Overview Map (Source: Contango Oil & Gas Co.)

The largest property in the package, the Elk Basin Field within the Big Horn Basin, is a conventional asset which has been producing from multiple horizons for over 100 years. The field currently produces approximately 2,000 boe/d (87% oil and 100% liquids), having exhibited low single-digit decline rates for several decades, according to Contango. 

The second largest asset in the portfolio, located on the Central Basin Platform and Northwest Shelf areas of the Permian Basin, currently produces 3,800 boe/d (40% oil and 59% liquids).

In the previous release, Coyler said he believed Contango had the expertise to maximize the value of the assets via its technical staff formerly at Mid-Con Energy Partners LP, which the company acquired through an all-stock deal that closed in January.

“We continue to be on the lookout for additional acquisition opportunities like Silvertip in this target rich environment,” Coyler added in his statement on Feb. 1.

The transaction has an effective date of Aug. 1, 2020.