Bayou City partners with AMH to develop STACK acreage

Bayou City Energy (BCE) affiliate BCE-STACK Development LLC (DrillCo) has entered into a joint development agreement (JDA) with Oklahoma Energy Acquisitions LP, a wholly owned subsidiary of Alta Mesa Holdings LP (AMH) to finance the drilling of joint wells on BCE's acreage in the core of the STACK play in Kingfisher County, Oklahoma. 

The drilling program initially calls for the development of 40 horizontal wells, which will be developed in two tranches of 20 wells each. The parties may also mutually agree to additional tranches on the same terms as the initial tranches. Development operations on the 40 joint wells began this month and are expected to continue into early 2017. DrillCo and AMH have committed to work together on any similar financial structures in Kingfisher County through the term of the JDA.

Under the JDA, BCE committed to fund 100% of BCE's working interest share up to the maximum of an average $3.2 million in drilling and completion costs per well for any tranche. BCE is responsible for any drilling and completion costs exceeding the limit. In exchange for the payment of drilling and completion costs, BCE will receive 80% of AMH's working interest (the "BCE interest") in each well, which interest will be reduced to 20% of AMH's initial working interest upon BCE's achieving a 15% internal rate of return in a tranche, and further reduced to 7.5% of AMH's initial interest upon BCE's achieving a 25% internal rate of return. The BCE interest automatically assigned by BCE upon achievement of these return thresholds will revert to BCE.

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