Current LLEX Stock Info

Lilis Energy, Inc. (ticker: LLEX) capped off the end of January with several notable announcements. The company plans to acquire more than 20,000 net acres in the Delaware Basin while maintaining two drilling rigs, targeting 14 gross (11 net) wells.

The company’s 2018 D&C CapEx is fully funded and aims for a solid ~$100 million. As of January 27, 2018, Lilis Energy produced ~4,011 BOEPD (~75% liquids). The company is looking at a 2018 production exit rate of ~7,500 BOEPD.

Lilis Energy Overview, Feb. 2018

Executive Chairman Ronald Ormand commented, “Lilis’ 2018 operating plan will focus on delineating our acreage position, further de-risking of our eastern acreage and continued delineation of additional benches, specifically the Wolfcamp A, Wolfcamp XY and 2nd Bone Springs.  We plan to run a two-rig program consisting of a combination of 1 and 1 ½-mile laterals in order to move toward cash flow neutrality in 2019.”

“Our plan is to drill 14 gross / 11 net wells throughout 2018. We will continue to look for opportunities to selectively fill in and enhance our working interest position and expand our acreage position in the core of the Delaware Basin. However, drilling and delineation will be our focus in 2018 as we move towards cash flow neutrality in 2019.  We also expect to be over 20,000 net acres and 5,000 net BOEPD in the near future,” Ormand said.

$70 million Delaware Basin acquisition

OneEnergy Partners Operating, LLC (OEP) will sell Lilis Energy 2,798 net acres in the Delaware Basin and associated production of 425 net BOEPD. The $70 million purchase will consist of $40 million in cash and $30 million of the company’s common stock.

Lilis Energy Delaware Basin Acquisition, Feb. 2018

Acquisition overview

  • Approximately 2,798 overlapping (84% operated) and contiguous net acres acquired in the Delaware Basin in Lea County, New Mexico
  • Ability to control timing and locations of planned drilling program with over 70% of the acreage being HBP
  • Acquisition adds more than 150 net locations (2) with potential targets in the Wolfcamp A, Wolfcamp XY, Wolfcamp B and 2nd Bone Spring zones, along with further upside from additional benches
  • Largely contiguous acreage blocks that allow for longer lateral development, adding ~72 gross locations of 1 ½ mile laterals
  • Average adjusted per acre cost of $18,942 (3) with net production of 425 Boepd for the year ended December 31, 2017
  • Current acreage of ~19,000 and committed acreage pipeline allows the company to exceed 20,000 net acres threshold
  • Acquisition includes 442 net acres that include two existing wells that Lilis currently operates: the Wildhog BWX State Com 1H and the Prize Hog State Com 1H. Post-closing, the company will have a 100% working interest on both wells
  • As a result of acquiring the 442 net acre interest in the Wildhog and Prizehog, Lilis will own 100% of 2,560 net acres in four contiguous blocks
  • This allows longer laterals and full control of the development plan
  • Drilling budget for the acquired New Mexico acreage contemplates the drilling and completion of four wells in 2018, including two 1-mile wells in the first half of the year targeting the Wolfcamp A and XY, respectively, and two 1 ½-mile laterals in the second half of the year

The acquisition has an effective date of October 1, 2017 and is expected to close in March.

(1)      Based on a 20 day VWAP multiplied by $1.05 and subject to certain conditions as of the closing of the Acquisition, (subject to a $4.25 floor and $5.25 ceiling)
(2)      Assumes 48 gross wells per section (640 acre section)
(3)     Based on $40,000  per flowing BOEPD

Lilis Energy Delaware Basin Acquisition Comparison, Feb. 2018

Operational update

Lilis is currently in the process of completing and flow testing three wells. The company anticipates completion operations to commence on three wells in February, including one in the eastern acreage and one in the Wolfcamp XY.

The company is currently drilling three wells, one Wolfcamp XY well and two wells in the eastern portion of its acreage. In 2018, the company’s budget will include drilling the following benches: Wolfcamp B, Wolfcamp A, Wolfcamp XY and 2nd Bone Spring.

Financial transactions

The company closed a new $50 million first lien term loan with Riverstone Credit Partners, L.P. (RCP), which was funded in full at closing. The company used approximately $30 million of the proceeds received at closing to repay and retire its existing first lien credit facility. The new credit facility may have additional availability of up to an additional $30 million, which was uncommitted at closing.

Lilis has agreed to issue $100 million worth of newly created perpetual preferred stock to Varde Partners. The preferred stock will pay quarterly dividends at a rate of 9.75% per annum PIK’d and holds a conversion price of $6.15. In addition, the company has optional redemption and forced conversion features. The preferred stock will fund the cash portion of the recent OEP transaction as well as a portion of the company’s 2018 drilling program.

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