Resolute Energy to buy Delaware basin acreage

Resolute Energy Corp., Denver, has agreed to acquire certain oil and gas properties in Reeves County, Tex., from Firewheel Energy LLC, a portfolio company of Houston private equity firm EnCap Investments LP, for $135 million. The deal is effective Sept. 1 and expected to close Oct. 7.

The Firewheel properties consist of 3,293 net acres in Resolute’s Delaware basin operating area, and include interests in 13 horizontal and 15 vertical wells altogether producing 1,200 net boe/d. The acreage is estimated to hold 6.2 million boe in proved reserves.

Roughly 95% of the acreage and all of the production and proved reserves are within the Resolute-operated Mustang project area in Reeves County. The remainder of the acreage is also in Reeves County.

“Our Mustang project area, covering more than 12,400 gross acres, is one of our two concentrated acreage positions in the Delaware basin,” explained Nicholas J. Sutton, Resolute’s chairman and chief executive officer. “This transaction allows us to add acreage, production, and opportunity without either the uncertainty associated with acquiring more speculative acreage or adding to our staffing and infrastructure needs.”

The acreage to be acquired represents a 25% increase in Resolute’s net acreage in Reeves County.

The deal also includes Firewheel’s interest in an earn-out agreement—to which Resolute is also a party—with Caprock Permian Processing LLC and Caprock Field Services. After the closing, Resolute will receive 100% of all payments from Caprock under the earn-out agreement.

Delaware drilling, output

Resolute also said its second-quarter production from its Delaware basin properties in Reeves County increased 115% vs. the first quarter to 4,979 boe/d. For the third quarter, the firm estimates production rose 90% quarter-over-quarter to 9,250-9,650 boe/d.

The firm has drilled and completed nine of its planned 14 gross wells in its 2016 drilling program. The ninth well, the South Mitre 02 2102H, is currently flowing back. The 10th well, the Boucher 2-3H, has reached total depth and is currently waiting on completion. An 11th well, the Uinta 0204H, was spudded on Sept. 22.

The Boucher and the Uinta are both 7,500-ft Wolfcamp A laterals in eastern Mustang and represent Resolute’s first 80-acre spacing test. Upon completion of the Uinta, the rig will move to the Appaloosa project area to drill one well before returning to Mustang for the remainder of the year. The firm plans plan to drill a pair of Wolfcamp A 7,500-ft laterals in East Mustang where it will test 80-acre offset stack spacing.

Production from the South Goat 02 2204H, a 10,000-ft lateral in Appaloosa, has established a 24-hr peak production rate of 2,902 boe/d. The North Elephant 02 1001H, a 10,000-ft Wolfcamp A lateral in Appaloosa, has now established a new peak 24-hr rate of 2,768 boe/d and a 30-day peak production rate of 2,254 boe/d. The Thunder Canyon 0204H, a 7,500-ft Wolfcamp A lateral in Mustang, has established a peak 30-day rate of 1,558 boe/d.

Resolute expects to continue the drilling program in Reeves County during 2017 with the same rig, and plans to add a second rig in the first quarter. The firm says a two-rig program would allow it to spud 21 gross (16.3 net) wells during the year. However, the firm notes the number of wells and the pace of drilling in 2017 will primarily be a function of liquidity, which in turn is influenced by commodity prices and production.

A single rig program would yield 11 gross (8.6 net) wells during the year. Either program would result in all of Resolute’s Delaware basin acreage being held by production, the firm says.

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