Parsley Energy updates on details and funding for Midland Basin acquisition

Parsley Energy Inc. (NYSE: PE) has entered into an agreement to acquire certain undeveloped acreage and producing oil and gas properties located adjacent to the company’s existing operating areas in Upton, Reagan, and Glasscock counties, Texas, for an aggregate purchase price of $148.5 million in from private-equity-backed PCORE Exploration & Production LLC.

The assets include 238 net horizontal drilling locations across 5,274 net surface acres in the company’s core operating area. Net production during the month of November from three producing horizontal wells was estimated at near 1,000 barrels of oil equivalent per day during. The acquisition also includes one drilled horizontal well that is anticipated to be completed by the seller prior to the closing of the transaction, scheduled for early January 2016.

The assets have an average working interest of 87% and an average royalty burden of 20%. The assets are anticipated to be 100% operated at close with no obligation to develop for two years.

Parsley Energy is an independent oil and natural gas company focused on the acquisition and development of unconventional oil and natural gas reserves in the Permian Basin in West Texas.

The deal was done at a “favorable” $19.6K/acre, said Seaport Global Securities in a note Thursday, noting that “with several potentially meaningful catalysts on the horizon (first Lower Spraberry and Southern Delaware results slated for Q4:15) and 2016 shaping up to be challenged (strip reflecting < $45/bbl in 2016), we like management’s use of equity to fund the acquisition while preserving its strong liquidity position (~$698MM pro forma for its borrowing base redetermination)."

Concurrent with the acquisition, PE announced a public offering of 8.5 million common shares, with an over-allotment option of 1.275 million shares. The offering, noted Stifel analysts, should “fully cover the acquisition purchase price, allowing PE to keep its top-tier balance sheet intact.”

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