Panhandle Oil and Gas Enters Haynesville Shale with Red Stone Acquisition

Panhandle Oil and Gas Inc. entered the Haynesville Shale through the acquisition of two packages of mineral and royalty assets from Red Stone Resources LLC.

In an Aug. 27 company release, Panhandle said it agreed to acquire the two packages totaling approximately 795 net royalty acres in the SCOOP and Haynesville plays for $6.9 million in cash and stock. Commenting on the transaction, Panhandle President and CEO Chad Stephens said the acquisition fits well with the strategy to grow the Oklahoma City-based company on an accretive basis.

“These assets are a nice blend of producing properties, near term development opportunities and upside potential in core areas with active drilling programs by high quality and well capitalized operators,” Stephens said. “It also marks our entry into the Haynesville play of East Texas and Louisiana, which we believe has significant potential and provides good development visibility.”

Earlier this year, Panhandle named Stephens, an industry veteran who previously served on the executive team at Range Resources Corp., as its CEO as part of a leadership transition tied to a shift in strategy by the company to increase its focus on the mineral acquisition market.

Panhandle, whose history dates back to 1926, originally operated as a co-op until 1979 when it became a public company through a merger with Panhandle Royalty Co. Today, the company owns roughly 258,000 net mineral acres principally located in Oklahoma, North Dakota, Texas, New Mexico and Arkansas. Approximately 71% of the mineral acreage is unleased and undeveloped, according to a company release.

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In its entry to the Haynesville Shale, Panhandle will acquire approximately 509 net revenue acres in East Texas in Harrison, Panola and Nacogdoches counties. Four rigs are currently running on the acreage with key operators including Aethon Energy Management LLC, Comstock Resources Inc. and Rockcliff Energy LLC.

The SCOOP package of the Red Stone acquisition covers approximately 286 net revenue acres in overriding royalty interests in the Springboard area of Oklahoma’s Grady County. Panhandle said all 28 sections included in the SCOOP package have producing wells and leases HBP. Key operators include Continental Resources Inc. and Marathon Oil Corp.

Combined, the two packages are currently producing 1.1 MMcfe/d comprised of 6% oil, 1% NGL and 93% natural gas. Estimated reserves are 7.4 Bcfe, 87% natural gas, and the company expects next 12 month production of 625 MMcfe. 

Further, Panhandle is estimating $1.1 million of cash flow to be generated from the assets over the next year.

The purchase price consists of $6.4 million in cash and $500,000 in Panhandle common stock. Panhandle intends to raise the cash portion of the purchase price through an underwritten public offering of common stock the company launched concurrently with the announcement of the Red Stone acquisition on Aug. 27.

The effective date of the Red Stone acquisition is June 1. The stock issued in connection with the acquisition will be subject to the same terms and conditions as the other subscribers for the offering. Stifel and Northland Capital Markets are acting as joint book-running managers for Panhandle’s equity offering with Stifel acting as representative of the underwriters. 

Panhandle expects the transaction to close in the first fiscal quarter of 2021.