Earthstone Energy Inc. has agreed to acquire Warburg Pincus-backed Independence Resources Management LLC (IRM) for $185.9 million. The price consists of an estimated $135.2 million in cash and 12.7 million shares of Earthstone stock.
IRM’s asset base and operations include average production of 8,780 boe/d (66% oil) for third-quarter 2020. The company holds 4,900 core net acres (100% HBP, 93% operated) in Midland and Ector counties, Tex., and includes inventory of 70 high-quality undeveloped horizontal locations targeting the Middle Spraberry, Lower Spraberry, and Wolfcamp A zones with additional potential locations in Jo Mill, Wolfcamp B, and Wolfcamp D zones. Also included are an additional 38,500 net acres (100% HBP, 100% operated) in the eastern Midland basin.
Earthstone expects a 52% increase to pro forma third-quarter 2020 production to 25,700 boe/d from 17,000 boe/d.
The transaction—expected to close in first-quarter 2021—has been unanimously approved by the board of directors of Earthstone and by the members of IRM. No further approvals are required. Warburg will have the right to appoint one director to Earthstone’s board. EnCap Investments LP will maintain the three existing EnCap-affiliated directors, resulting in a board consisting of nine members. No changes to Earthstone management will occur in connection with the transaction.
