Resolute Energy Corp. (ticker: REN) is engaged in the acquisition, development and production of onshore domestic hydrocarbons, principally crude oil. Resolute’s producing assets are the Aneth Field in the Paradox Basin of Utah and Hilight Field in the Powder River Basin of Wyoming, in the Permian Basin of West Texas and in the Bakken trend in the Williston Basin of North Dakota.
REN is methodically building its position in the Permian Basin, increasing oil production, reserves and visible growth potential. During December 2012, Resolute announced two acquisitions that doubled its Permian Basin exposure to 16,882 net acres, up from 8,850 net acres at September 30, 2012.
The first acquisition was announced on December 3, 2012 and included an operated position consisting of 1,418 barrels of oil equivalent per day (BOEPD) of production and proved reserves of 4.1 million barrels of oil equivalent (MMBOE). The details of the first transaction are available in our story posted December 4, 2012, titled “Resolute Energy Corp Makes Accretive Permian Basin Oil Acquisition.”
The second acquisition was announced on December 28, 2012, and was a purchase of a 32% non-operated working interest in production of 1,050 BOEPD and proved reserves 5.1 million BOE. Importantly, in this second acquisition, Resolute secured an option to purchase the remaining 68% of the sellers’ interests and become the operator.
We are publishing this write-up to give OAG360 readers an idea of what the combined acquisitions mean for Resolute, not including the impact of exercising the option to acquire the balance of the properties in the second acquisition. Here are a few examples:
- Pro forma production from the Permian Basin for Q3’12 rose to 3,066 net barrels of oil equivalent per day (BOEPD), for an increase of 413%.
- Total pro forma production for Q3’12 rose by 2,468 BOEPD to 11,838 BOEPD, for an increase of 26.3%
- Increased visible growth potential by adding 109 unrisked drilling locations prospective for the Wolfberry interval, 135 recompletion opportunities in existing well bores and an estimated 78 unrisked infill drilling locations from downspacing from 40-acre to 20-acre spacing.
- Pro forma, the Permian Basin accounted for 26% of total production in Q3’12, up from 6.4% pre-acquisitions.
REN’s recent focus is reinvesting cash flow from Aneth to its growth areas including the Permian Basin and Bakken oil shale in North Dakota. These most recent acquisitions clearly demonstrate a willingness to expand through acquisition and purchase properties that have additional growth opportunities from development drilling, infill drilling and recompletions. Resolute conveyed the acquired leases are largely held by production and the drilling programs will be primarily self-funded.
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As we mentioned in our December 4, 2012 note, REN chose the Permian and Williston Basins as the primary growth engines for the company. And, although REN continues to build oil production at its legacy Aneth Field, REN is focused on growing production outside of the Paradox Basin. Chairman and CEO, Nicholas Sutton said in a news release, “We plan to realize the growth potential from these new assets, which is largely self-funded, with a drilling program over the next four to five years.”
Resolute’s second Permian Basin acquisition seems to confirm our earlier thoughts, and powers up the company’s growth potential from this oil-prone growth asset.
We estimate that combined, REN purchased the assets at a price of $99,271 per flowing BOEPD, which compares favorably to recent Permian acquisitions and as compared to $131,514 per trailing twelve month (TTM) flowing BOEPD average for four E&P companies with operations weighted to the Permian in EnerCom’s E&P database, as of December 28, 2012.
We expect Resolute to announce capital budget and production guidance soon, and we will be looking forward to seeing a strong contribution from the oil-rich Permian properties.
Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. The company or companies covered in this note did not review the note prior to publication. As of the report date, no employee of EnerCom has a long-only equity position in Resolute Energy.