Ajax Resources LLC, a newly formed exploration and production company backed by private equity firm Kelso & Co., has agreed to acquire all interest in Yellow Rose field belonging to Houston-based W&T Offshore Inc. for $376 million.
W&T also reserved a 1-4% sliding scale overriding royalty interest in the field. The deal is effective Jan. 1 and expected to close during the third quarter.
W&T’s interest in Yellow Rose field includes 25,800 net acres in Andrews, Martin, Gaines, and Dawson counties in West Texas. Net production from the field in July averaged 3,000 boe/d.
Ajax believes that significant resource potential exists in the assets—which the company was formed to acquire—through multiple stacked pay horizontal drilling zones, and the company will benefit from extensive well control with more than 200 vertical and horizontal wells drilled and producing across the property.
Ajax will be led by Chief Executive Officer Harvey Klingensmith, who has more than 40 years of operating experience in the oil and gas industry.
For W&T, the move represents an opportunity to increase its focus on offshore E&P. Earlier this year the company reported a discovery at Ewing Banks Block 910 and the start of production from the Medusa SS No. 6 well on Mississippi Canyon Block 538, both in the deepwater Gulf of Mexico (OGJ Online, May 28, 2015).
“This sale will allow us to strengthen our balance sheet and improve our financial flexibility to pursue the acquisition of Gulf of Mexico assets while valuations are favorable,” explained Tracy W. Krohn, W&T chairman and chief executive officer. “We believe that current conditions are good for W&T to identify quality offshore producing assets that offer upside exploration and development opportunity.”
