Ring Energy Inc. (NYSE MKT: REI) has signed a purchase and sale agreement (PSA) to acquire producing wells and leaseholds located in Culberson and Reeves counties, Texas. The property consists of approximately 14,000 net acres. Ring will be the operator and have an approximate 98% working interest and average net revenue interest in excess of 78%. The acreage is located in the Delaware Basin.
The current net daily production to the company from the properties is approximately 1,300 Boe/d, which is approximately 80% oil. Ring’s initial proved developed producing (PDP) reserve estimates, as determined by outside independent engineering firm Cawley, Gillespie and Associates, are an estimated 4.7 million BOEs net to Ring, with a PV-10 value of approximately $128.5 million. The report was completed at year-end 2014 using average pricing of $90.24 per barrel of oil and $4.64 per MCF of gas. In addition, Ring internal engineering is currently evaluating additional proved undeveloped, probable, and possible opportunities.
The acquisition purchase price is $75 million. With the addition of the property, Ring has entered into a new five-year, $500 million senior credit facility, increased from $150 million, with an immediate borrowing base of $100 million, increased from $40 million. The acquisition will be financed with existing cash reserves and the company’s upsized senior credit facility. The closing date is scheduled to be on or before June 30, with an effective date of May 1.
Pro forma for the pending acquisition, Ring would have over 2,750 Boe/d of current net daily production and over 45,000 gross (32,000 net) Permian acres.
SunTrust Bank provided committed financing to support the upsized $100 million borrowing base facility, and SunTrust Robinson Humphrey Inc. served as exclusive financial advisor on the acquisition.