Ring Energy Inc. terminated the purchase and sale agreement of its Delaware Basin acreage on Oct. 30 citing the prospective buyer’s inability to close the deal despite multiple amendments.
“We are very disappointed that the buyer was unable to complete this important and highly anticipated transaction, but believe we have, after six amendments to the original purchase and sale agreement, in good faith, provided them every opportunity to close the transaction,” Paul McKinney, CEO and chairman of Ring Energy, said in a statement.
Ring announced the agreement in April 2020 to divest its Delaware Basin position comprising nearly 20,000 acres in Culberson and Reeves counties, Texas, to an undisclosed buyer for about $31.5 million. At the time, Ring expected to close the deal, which included a $500,000 non-refundable deposit, in about 60 days.
In an Oct. 8 statement, Ring management said it had granted the buyer an extension to Oct. 29 and the company had wired Ring an additional non-refundable $1 million “as a show of good faith.”
In total, McKinney said Ring Energy has received $5.5 million in non-refundable deposits which have been used to reduce the outstanding balance on its senior credit facility.
“While the Delaware is not in our core areas of the Central Basin Platform or the Northwest Shelf, these assets have additional development opportunities that could ultimately lead to more value for the Ring shareholders,” McKinney said.
McKinney was appointed as CEO and board chairman in late September in hopes of helping the company achieve its goal of increased shareholder value. In a statement, Tim Rochford, co-founder and former chairman of Ring Energy, explained the decision behind the leadership change was driven by the board’s discouragement toward Ring’s current stock price and the “apparent lack of understanding and appreciation for the value” that he said the Midland, Texas-based company represents.
“The board concurred with my evaluation that a change in our current approach was necessary and that Paul McKinney had the background, expertise and enthusiasm to effect that change,” said Rochford, who remains with the company in an ongoing advisory capacity.
Ring Energy currently operates in the Permian Basin of West Texas and New Mexico with acreage positions in the Northwest Shelf and Central Basin Platform. The company’s Delaware Basin position represented about 8% of Ring’s pre-deal enterprise value and contributed about 980 boe/d of production in fourth-quarter 2019, of which 56% was oil.
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