Denver’s Synergy said they have a definitive agreement to buy Noble’s oil and natural gas properties in the Greeley Crescent area of Weld County, Colo. Synergy will buy 33,100 net acres, mostly undeveloped, for $505 million—a price that is roughly half of the company’s market capitalization.
Synergy, headed by former Kodiak Oil & Gas co-founder Lynn Peterson, said that at closing, the company will have interests in about 47,200 net largely contiguous acres in its defined Wattenberg fairway area and additional 22,000 net acres of other Wattenberg acreage.
The deal advances Noble’s liquidity position in a savvy move for land it wasn’t actively working. The sale price per acre was about $11,000-$13,000 per acre, an analyst said.
So far in 2016, the company has inked sales of $775 million.
Noble currently has no rigs running on the acreage and have drilled 14 horizontal wells in the past four years, said David Kistler, senior research analyst with Piper Jaffray & Co.
Additionally, the divested acreage represents 8% of Noble’s D-J Basin acreage and 2% of its production.
David L. Stover, Noble Energy's chairman, president and CEO, said the Greeley Crescent sale signifies the company’s continued portfolio management efforts.
The transaction also highlights the strong value of undeveloped acreage throughout the D-J Basin. Kistler said the undeveloped portion of the Greeley Crescent assets was about $235 million.
“Our D-J Basin development activities are currently focused on Wells Ranch and East Pony, where we have a deep inventory of long lateral drilling opportunities in an oily part of the basin,” Stover said. “In addition, our existing infrastructure in these areas provides a competitive advantage.”
Tudor, Pickering, Holt & Co. acted as the lead financial adviser to Noble Energy on the transaction, which expected to close in two phases in June and by the end of 2016.
Peterson, Synergy’s chairman and CEO, said the deal is “transformational” and a significant step forward to become a leading operator in the Wattenberg Field.
To finance the purchase, Synergy will sell 45 million shares of its common stock for total gross proceeds of about $261 million. The offering is expected to close on or around May 10, subject to customary closing conditions.
“By consolidating our properties into a more focused footprint, we should be able to gain operating efficiencies,” Peterson said. “We have assembled an experienced Wattenberg technical team that can execute a capital efficient growth plan while maintaining a balance sheet with low leverage.”
Synergy doesn’t expect to increase its operation activities in 2016 but development should increase in 2017.
The company has identified more than 900 gross locations on the acquired lands, of which over 800 are suitable for mid- 7,500-foot to 10,000-foot laterals, using an initial assumption of horizontal development with 20 to 24 wells per drilling unit.
For the first quarter of 2016 estimated net daily production was 800 barrels of oil equivalent per day (boe/d) from nonoperated properties and 1,600 boe/d from operated properties.
“This was a unique opportunity to acquire a contiguous block of acreage in the heart of the Wattenberg Field that may never present itself again,” Peterson said. “The acquisition provides the company the ability to exploit the talents of our team across a broader and more contiguous footprint, which should result in operational efficiencies and enhance shareholder value.”
In two separate transactions, Synergy also said it entered into definitive purchase and sale agreements with private entities to divest about 3,700 net undeveloped acres and 107 vertical wells primarily in Adams County, Colo., for $27 million in cash. The acreage includes 107 vertical wells and 200 boe/d of production. The deals are expected to close in the second quarter of 2016.
Darren Barbee can be reached at email@example.com.
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