Escalera Resources Co. (ESCR) announced today that it has signed an asset purchase and sale agreement for the strategic acquisition of producing wells and leasehold interests from Warren Resources, Inc. ("Warren") (WRES). The assets, located in the Atlantic Rim Area of the Washakie Basin, Wyoming, are highly complementary to Escalera's existing holdings and consist primarily of Warren's 74% operated working interest in the Spyglass Hill Unit (in which Escalera already holds a 22% non-operated working interest), an 11% non-operated working interest in Escalera's Catalina Unit (of which Escalera operates with an 86% interest), and midstream gathering and pipeline assets within the Spyglass Hill Unit. Current production from the assets is approximately 14 mmcf/d and proved developed reserves were 83 Bcf as of April 1, 2015.
The Spyglass Hill Unit covers approximately 97,000 gross acres and Warren currently operates 367 producing and injection wells in the unit. Production from the Spyglass Hill Unit currently feeds into a Wyoming Interstate Company ("WIC") pipeline through the midstream assets that are part of the transaction and include a 59 mile long pipeline. The acquisition also includes certain deep rights' interests in the Atlantic Rim.
Charles F. Chambers, Escalera's CEO, commented, "This acquisition will consolidate the major operating and economic interests in the Atlantic Rim, and is expected to be immediately accretive to cash flows, allowing for a more cost efficient capital allocation and decision-making framework for operations in the area moving forward."
The transaction has an effective date of April 1, 2015, with an expected closing in mid-August 2015, and is subject to confirmatory due diligence and the arrangement of financing.