Adds 114,000 net acres in North Eagle Ford
Magnolia Oil & Gas (ticker: MGY) announced the acquisition of significant non-operated assets in the Eagle Ford today, as Steve Chazen’s new company continues to increase its holdings.
Magnolia will acquire a net 114,000 net acres in the northern portion of the Eagle Ford, adding to the company’s Giddings Field position. Magnolia will also acquire Harvest’s working interest in a portion of Magnolia’s Karnes County acreage, thus consolidating its position. Magnolia estimates that this portion of the sale will add about 15 net locations to the company’s drilling inventory.
The assets produced about 4.8 MBOEPD in the first half of the year, with 1.4 MBOEPD from Karnes County and 3.4 MBOEPD from the Giddings Field.
Source: Magnolia Oil & Gas
Magnolia will pay $135 million in cash to Harvest, plus 4.2 million shares of stock. Based on yesterday’s closing prices, the total payment is valued at about $190 million. Magnolia holds about $100 million in cash on its balance sheet, so at least part of this acquisition will be paid for through the company’s credit facility.
The acreage acquired can likely be considered an upside to this sale, as nearly all the purchase price can be attributed to production. The purchase price equates to about $39,580 per flowing BOE, quite close to the standard production valuation of $35,000 BOE.
This is a significant increase in Magnolia’s holdings, but pales in comparison to the company’s previous deal. Magnolia was formed through a $2.7 billion SPAC acquisition, when TGP Pace Energy Holdings acquired assets from EnerVest. Former Oxy CEO Steve Chazen leads the company.
Magnolia Chairman and CEO, Steve Chazen, commented “We are very pleased to announce our agreement to acquire Harvest’s South Texas Assets. Harvest represented our largest non-operated working interest owner and the assets are a natural fit for Magnolia. We believe this accretive transaction is highly complementary to our business objectives of maximizing shareholder returns by generating steady production growth, strong pre-tax margins and significant free cash flow.”
