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Resolute Acquires Permian Assets

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Resolute Energy announced Monday it has entered into a definitive agreement to acquire oil assets, including existing production and undeveloped acreage, in the Permian Basin of Texas and southeast New Mexico from a private party for a purchase price of approximately $120 million.

The transaction is expected to close on or about Dec. 21, 2012. The company expects to finance the acquisition with debt. The transaction has an effective date of Aug. 1, 2012, and is subject to customary conditions and purchase price adjustments.

The assets are primarily located in Howard County, Texas, and Lea County, New Mexico.

Combined, the acquired properties produced a net 1,418 barrels of oil equivalent per day (boe/d) in the third quarter of 2012 and had estimated proved reserves of 4.1 million Boe, of which 73 percent is crude oil. The Company believes that there may be significant additional resource potential in excess of the reserves currently categorized as proved.

Howard County, Texas

The Howard County assets include non-operated working interests of approximately 39 percent, consisting of 1,310 net acres primarily targeting the Wolfberry play. The 23 existing wells produced a net 377 Boe per day in the third quarter of 2012, approximately 64 percent of which was crude oil. This acreage is approximately six miles from the Company’s existing operations in Howard and Martin counties.

Growth potential exists from approximately 64 vertical drilling locations targeting the Wolfberry interval and 66 recompletion opportunities that are not categorized as proved. Other upside exists from the multi-pay, multi-play nature of the area, which is prospective for horizontal development in the Wolfcamp and Cline.

The acreage is largely held by production, and the Company estimates that a one-rig program for two years will hold all of the acquired leases.

 

Lea County, New Mexico

The primary asset acquired in Lea County is Denton Field, which was discovered in the 1950s and is a conventional fractured carbonate reservoir. The assets include 2,767 net acres (2,880 gross), all of which are held by production, and in the third quarter of 2012 the 39 existing wells produced a net 833 Boe per day. Approximately 89 percent of production consisted of crude oil.

Resolute will be the operator of the Lea County assets.

Growth potential and upside exists from activities associated primarily with the deepening of existing wells and infill drilling from 40-acre to 20-acre spacing.

Other properties

Other assets being acquired are a combination of conventional and unconventional producing properties in the Permian Basin. The acquired assets comprise 2,455 net acres (3,380 gross acres, all HBP) and produced 208 net Boepd in the third quarter of 2012.

Nicholas J. Sutton, Resolute’s chairman and chief executive officer said: "Since our founding, Resolute has aggressively pursued the most attractive domestic oil plays to create the foundation for long-term growth in value. We plan to realize the growth potential from these new assets, which is largely self-funded, with a drilling program over the next four to five years. The Permian Basin is an area we have long targeted as an important growth engine for the Company, and this most recent expansion further strengthens our visible growth potential in this multi-pay, multi-play oil-prone region."

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