Centennial to add more Delaware basin assets in $855-million deal

Centennial Resource Development Inc., Denver, has agreed to acquire 100% of the leasehold interests and related upstream assets in Reeves County, Tex., owned by Silverback Exploration LLC, San Antonio, for $855 million.

Centennial is backed by energy-focused private equity firm Riverstone Holdings LLC, an affiliate of which agreed to acquire the assets on Nov. 21. The affiliate on Nov. 27 agreed to assign its right to purchase the assets to Centennial. The deal is expected to close on Dec. 30.

The deal comprises 35,000 net acres, of which 95% is operated with an average working interest of 88%, that directly offsets existing Centennial acreage in Reeves County, with current net production of 3,500 boe/d. Once the deal is complete, Centennial will have 77,000 contiguous net acres in the Delaware basin.

Centennial sees at least 600 horizontal drilling locations on the acreage assuming 880-ft spacing prospective for the Upper Wolfcamp A, Lower Wolfcamp A, and Wolfcamp B, which are estimated to have 210, 180, and 220 locations, respectively.

The firm says the acreage has an estimated undeveloped resource potential of more than 600 million boe from the Wolfcamp A and Wolfcamp B formations, with additional upside potential from the Wolfcamp C, Avalon, and Bone Spring formations. The deal increases Centennial’s operated extended lateral locations by 136%.

“This transaction increases our horizontal drilling inventory by 44% and more than doubles our inventory of extended length laterals, which we believe provides the most capital-efficient development,” commented Mark Papa, Centennial chief executive officer.

He added the deal allows Centennial to increases its oil production target for 2020 to 50,000 b/d of oil from 30,000 b/d.

Focused on the southern Delaware basin, Centennial Resource Development was formed earlier this year through the merger of Centennial Resource Production LLC and Silver Run Acquisition Corp., a special purpose acquisition firm created by Papa and Riverstone (OGJ Online, July 22, 2016).

Papa, a Riverstone partner who was chairman and chief executive officer of EOG Resources Inc. during 1999-2013, has led Centennial since that deal was completed. Centennial Resource Production was formed in 2013 by an affiliate of NGP Energy Capital Management LLC of Irving, Tex.

The deal between Centennial and Silverback is among dozens to have taken place since midyear in the Permian basin of West Texas and southeastern New Mexico, where the Delaware and Midland basins have drawn considerable interest.

Last week, Midland, Tex.,-based Concho Resources Inc. struck its third deal for Permian acreage this year alone, agreeing to buy 16,400 net acres in the northern Delaware basin from an undisclosed buyer for $430 million (OGJ Online, Nov. 21, 2016).

Contact Matt Zborowski at matthewz@ogjonline.com.

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