Lilis Energy, Inc. (NYSE: LLEX), an exploration and development company operating in the Permian Basin of West Texas and Southeastern New Mexico, announced today that it has entered into a crude oil firm takeaway and sales agreement with an affiliate of Salt Creek Midstream, LLC (Salt Creek) to secure firm takeaway pipeline capacity and pricing on a long haul pipeline to the Gulf Coast commencing July 1, 2019. Lilis also intends on obtaining Gulf Coast pricing with Salt Creek during the first quarter of 2019.
The agreement guarantees 6,000 Bbl/d of firm capacity on a long-haul pipeline to Corpus Christi at a specified price, beginning July 1, 2019 through June 30, 2020, and 5,000 Bbl/d from July 1, 2020 through June 30, 2024. Lilis will have firm takeaway and firm pricing commencing July 1, 2019 and the ability to increase capacity subject to availability by Salt Creek. Further, Salt Creek has agreed to purchase the crude from Lilis at a specified Magellan East Houston price with a fixed “differential basis,” providing price relief versus current market conditions.
In the interim, Lilis has secured sales agreements subject to Midland pricing, and will continue to transport and sell its crude oil via trucks through the completion of the crude oil gathering system being constructed by Salt Creek, which is expected to occur in the first quarter of 2019. Once the crude is in the Wink terminal, Lilis will have firm pricing takeaway agreements in place based on Gulf Coast pricing. The Company has not encountered any trucking interruptions with its first purchaser and third-party trucking company to-date and expects the same flow assurance through the completion of the crude oil gathering system.
“We have made significant advancements on our Permian Basin infrastructure and takeaway strategy. This agreement completes substantially all of the necessary takeaway and movement of crude, complementing our in-place agreements for natural gas, NGL’s and water. The agreement will provide the Company flow assurance as well as access to Gulf Coast pricing and potentially export markets. We will have complete flow assurance initially through trucking and then through this agreement and ability to substantially enhance crude price realizations in 2019,” said Ronald D. Ormand, Chairman and CEO.
This agreement follows a crude oil gathering agreement entered into between the companies in May 2018 for a new regional pipeline system and gathering and transportation service for Lilis’ oil production to the terminal in Winkler County, Texas. The Winkler Terminal will allow Lilis to directly access multiple pipelines with downstream optionality. For further information, see Lilis’ news release: “Lilis Energy Announces Crude Oil Gathering Agreement With Salt Creek Midstream, an Arm Energy Holdings’ Affiliate” (May 23, 2018).
