Lilis Energy Inc., San Antonio, plans to drill and complete four wells in 2018 on Delaware basin acreage to be acquired from OneEnergy Partners Operating LLC (OEP) in a cash-and-stock transaction valued at $70 million.
The purchase and sale agreement consisting of $40 million in cash and $30 million common stock includes 2,798 net acres in Lea County, NM, and associated production of 425 net boe/d. The wells to be drilled include two 1-mile wells in the first half of this year targeting the Wolfcamp A and XY, and two 1½-mile laterals in the second half of the year.
The overlapping and continuous acreage is 84% operated and 70% held by production and adds 150 net drilling locations with potential targets in the Wolfcamp A, Wolfcamp XY, Wolfcamp B, and 2nd Bone Spring zones, along with further upside from additional benches, Lilis said. Contiguous acreage blocks allow for longer lateral development adding 72 gross locations of 1½ mile laterals plus.
The acquisition includes 442 net acres that include two existing wells currently operated by Lilis: the Wildhog BWX State Com 1H and the Prize Hog State Com 1H. Post-closing, Lilis will have 100% working interest on both wells, resulting in Lillis’s 100% ownership of 2,560 net acres in four contiguous blocks.
The company “has reached a new milestone with our pro forma total net acreage count approaching 20,000 net acres in the Delaware basin and production approaching 5,000 boe/d,” said Lilis Executive Chairman Ronald Ormand.
To fund a portion of the acquisition and a portion of its 2018 drilling program, Lilis entered into a definitive securities purchase agreement to sell shares of a new series of convertible preferred stock to certain private funds affiliated with Varde Partners Inc. for $100 million. Additionally, Lilis closed on a $50 million first lien term loan with Riverstone Credit Partners LP and used $30 million to repay and retire its existing first lien credit facility.
Closing of the acquisition is expected in March with an effective date of Oct. 1, 2017.