Ring Energy Inc. (NYSE MKT: REI) has finalized its acquisition of 2,481 gross (1,567 net) acres located in Andrews and Gaines counties, Texas. The acreage, comprising 92 separate leases, includes both “developed” and “undeveloped” parcels and is in close proximity to existing company-owned Permian Basin assets that are currently in varying stages of development.
The “developed” area comprises 907 net acres with current net production of 42 barrels of oil equivalent (boe) per day from the San Andres and Glorieta formations, and is over 92% oil. In addition to the producing wells on the properties, internal engineering has identified 57 new proved undeveloped (PUD) drilling locations in the San Andres on 20- and 10-acre spacing, with the potential for additional locations through increased in-fill drilling and development, as well as up to 10 additional Glorieta wells on 40-acre spacing. Ring Energy believes the current production can be enhanced by the addition of new pay intervals and the re-stimulation of the new and current zones.
The “undeveloped” area comprises 660 net acres, with 157 new potential drilling locations in the San Andres on 10-acre spacing. In addition to the San Andres, internal engineering has also identified opportunities in other pay zones, including the Glorieta.
Ring will be the operator and have an average working interest of 81% and average net revenue interest of 61%. The company’s initial reserve estimates, as determined by internal engineering evaluations, indicate that the “developed” leases have an estimated 1.45 million boe of proved reserves net to Ring, exclusive of any additional probable or possible oil reserves.
The transaction purchase price is $6.45 million, and is to be paid from existing cash balances. The closing on the acreage occurred Feb. 27. Ring has added 12,940 net acres since January 2013, including this announcement. The company’s total acreage position is 26,343 net acres: 12,111 net acres in Andrews and Gaines counties, Texas, and 14,232 net acres in Gray, Finney and Haskell counties, Kansas.
Ring also announced the addition of a second drilling rig which is on site and has begun drilling. The company had previously stated its intentions to add a second rig by mid-year 2014 and projected drilling approximately 105 new development wells. Based on the addition of the second rig in mid-February, the company now projects drilling approximately 130 new development wells in 2014.