Ring Energy Inc. (NYSE MKT: REI) has closed its acquisition of the Delaware Basin acreage located in Culberson and Reeves counties, Texas, for a purchase price of $75 million. The acquisition was financed with proceeds from the company’s recently completed public common stock offering and its new senior credit facility.
The effective date of the acquisition is May 1. The acquired property is located in Culberson and Reeves counties in the Delaware Basin of West Texas, and consists of 14,645 gross acres (14,322 net). The current net production to the company from this acquisition is approximately 1,300 BOE per day. Ring will be the operator, and will have a 98% working interest and net revenue interest of 79%.
Commenting on the acquisition, analysts from Roth Capital Partners said, “Ring is acquiring a group of properties that, in our view, fit well with the company’s existing properties and the talent and experience of the management and technical team. Ring has long been on the hunt for an acquisition but Ring didn’t ‘follow the crowd’ and chase Bone Spring deals or Wolfcamp deals. Ring is sticking to what the company knows best. Given our experience in the sector, this type of approach usually bodes well. Ring’s core producing properties are relatively shallow, conventional reservoirs producing from vertical wellbores. The producing horizons of the acquired properties are also relatively shallow, conventional reservoirs producing from vertical wellbores. Also, from the viewpoint of operations and logistics, the properties fit well with Ring’s existing properties, being only a short distance from the company’s core properties on the Central Basin platform. The deal increases proved reserves by 45% and approximately doubles production and Permian Basin net acreage. Crude oil content remains favorably high at 93%.”