Petroleum Development to Take Stakes in Wolfberry Play
Petroleum Development has signed an agreement with a private company to acquire various producing assets located primarily in the Wolfberry oil trend in West Texas for $45 million in cash and PDC's producing Michigan Gas assets valued by the Seller at $30 million.
Key Highlights of the Transaction:
- The Company enters the oil and liquid-rich gas Wolfberry trend by acquiring assets in West Texas. All assets acquired will be operated by PDC.
- The Permian Basin assets include 72 wells on approximately 8,300 net acres located primarily in Midland, Ector, Martin and Andrews counties, and over 120 identified Wolfberry oil drilling locations on 40-acre spacing.
- The Company expects the assets will add approximately 8.5 million barrels of oil equivalent ("Boe") in proved plus probable (2P) reserves. The 2P reserves are estimated to be over 70% crude oil and include 85 of the 120 identified Wolfberry drilling locations. The percentage of PUD versus probable reserves will be finalized later this year.
- PDC expects the transaction to add an average of approximately 900 Boe/d during the next twelve months. These assets are expected to provide the Company with multi-year production growth in the Permian Basin.
- In addition to the drilling locations in the Wolfberry trend (Spraberry, Dean and Wolfcamp), the assets contain multiple oil producing zones including the Ellenberger, Strawn and Fusselman, where PDC plans to pursue several low cost recompletions and production optimization projects. PDC plans to initiate a one rig drilling program in the Wolfberry trend during the fourth quarter 2010.
- The cash portion of the acquisition will be funded with a drawing from the Company's revolving credit facility. The acquisition is projected to be cash flow accretive and will be accounted for as a like kind exchange to optimize tax efficiency.
- The effective date of the transaction is May 1, 2010, and the closing date is projected to be July 30, 2010.
Richard W. McCullough, Chairman and Chief Executive Officer, stated, "We are very pleased with this acquisition which complements our existing asset portfolio due to its high oil and natural gas liquids content. Additionally, we believe we will be able to deliver strong production growth from this Wolfberry trend acquisition as it has many operational similarities to our Wattenberg Field assets. The transaction provides us the opportunity to exchange developed non-strategic shallow Michigan producing gas assets for a foothold in the prolific Permian Basin through the high-growth Wolfberry trend. This strategic acquisition fits our long-term objective of expanding our project inventory in new geographic areas. We will incorporate the operational and financial impact of this transaction in our 2010 updated guidance to be provided at our July 15, 2010 Analyst Day in Denver."
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