Current YUMA Stock Info

Capital heading to the Permian: company’s first Horizontal San Andres well

Yuma Energy, Inc. (ticker: YUMA) has upsized and priced an underwritten public offering of its common stock, consisting of 9,600,000 shares of common stock at a public offering price of $1.00 per share for aggregate gross proceeds of $9,600,000, before expenses.

Yuma also granted the underwriters a 30-day option to purchase up to an additional 1,440,000 shares of its common stock at the public offering price of $1.00 per share, to cover over-allotments, if any, which if exercised in full would bring the aggregate gross proceeds to $11,040,000, before expenses.

Yuma intends to use the net proceeds from the offering to expand its horizontal San Andres play located in Yoakum County, Texas.

Yuma, whose operations and assets are in Texas, North Dakota, Louisiana and California, recently entered into the Permian basin through a joint venture with two privately held energy companies in an Area of Mutual Interest (“AMI”) covering approximately 33,280 acres in Yoakum County, Texas.

The company said these funds raised in the offering will provide for additional leasehold acquisitions in the Permian basin, the drilling of a San Andres horizontal oil well along with a Devonian salt water disposal well and other field infrastructure, and for general working capital purposes.

Located in the Northwest Shelf of the Permian basin, the primary target within the AMI is the San Andres formation, which the company said has been one of the largest producing formations in Texas to date.

As of June 30, 2017, Yuma held an 87.5% working interest in approximately 2,491 acres (2,180 net acres) within the AMI and the company said it intended to apply horizontal drilling technology to the San Andres formation, commonly referred to as Horizontal San Andres Play, and in certain areas, referred to as a Residual Oil Zone Play (ROZ) due to the presence of residual oil zone fairways with substantial recoverable hydrocarbon resources in place, the company reported in its Q2 2017 10-Q filing.

Currently, Yuma is the operator of the joint venture. Yuma said it intends to acquire additional leases offsetting existing acreage.

Northland Capital Markets and Euro Pacific Capital are acting as joint book-running managers for the offering.

In May, Oil & Gas 360® interviewed Yuma’s Chief Operating Officer Paul McKinney about the company’s entry into the Permian and the San Andres play in particular. The interview Q&A is republished below.

The San Andres play unearthed:  an OAG360® exclusive  interview with YUMA COO Paul McKinney

Oil & Gas 360® spoke with Yuma Executive VP and COO Paul McKinney to learn about the San Andres play and see how the area compares to the more familiar Delaware and Midland basins.

“The San Andres play is probably one of the better kept secrets in the Permian right now,” McKinney told Oil & Gas 360®. “The capital cost is significantly less [on San Andres wells].

Yuma Energy Upsizes, Prices Public Stock Offering

Source: Yuma Energy

“The ratio of the producing rates and reserves, and this is my opinion and I think that in the next year it will be proven to be this way, I think you’ll find that the San Andres play itself will ultimately provide better economics in terms of rate of capital employed or rate or return or whatever parameter you want to use.

“It’s a newly-emerging play, there have been quite a few wells in the Yoakum County area and the area just west of Yoakum, in Lea County in New Mexico. There’s been over 75 wells drilled in that area and the economics are very robust.

“We have looked at all the wells in the play, including the wells that were drilled early on when people were not sure where to land the laterals and how to complete the wells. Many of the early wells were fraced into the ocean, some of the frac jobs were too large, the landing zones were too high, but if you include all those wells that were not optimal, a P50 on a one-mile horizontal well would be 300 BOPD IPs and about 300 MBO EUR. Looking at a 1.5 mile well, again including non-optimal wells, they came on with IP rates of about 330 BOPD and about 500 MBO EURs.

“So when you look at the resulting economics, San Andres wells are robust at $45/bbl oil. There are 50% to 70% rates of returns, with very short payouts so from an economics standpoint they are very robust.

“I made a presentation at the IPAA conference and when I got off the stage after presenting our entry to the Permian basin, an engineer who is very familiar with the play and is highly respected in the industry came up to me and said, ‘your economics are conservative.’ I was very encouraged by that.

“This play runs from Andrews and Gaines counties up to Yoakum and Cochran counties and over to the eastern counties of New Mexico. Every area is different, there is a lot of variability in the rocks and how you treat these wells, but it is a very exciting play.

“For the most part, you have a few publicly traded companies who have the financial wherewithal to do quite a bit with it, but it’s also the playground where a lot of private equity companies have invested and are doing very well. Every one I’ve seen so far has had very handsome results. So, like I said it’s one of the best-kept secrets in the Permian basin. But I think a year from now people will be talking about it quite a bit,” McKinney told Oil & Gas 360®.

 

 


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