Earthstone in $627MM Delaware Basin Deal

Earthstone in $627MM Delaware Basin Deal
Closing is anticipated in the third quarter of 2022.

Earthstone Energy Inc (NYSE: ESTE) has announced that it has entered into an agreement to acquire the New Mexico assets of Titus Oil & Gas Production LLC, Titus Oil & Gas Production II LLC and their affiliates located in the northern Delaware Basin.

The aggregate purchase price of the Titus acquisition is approximately $627 million, consisting of $575 million in cash and approximately 3.9 million shares of Earthstone's Class A common stock, Earthstone revealed, adding that both are subject to customary closing adjustments. The effective date of the deal will be August 1, 2022, with closing anticipated in the third quarter of 2022, Earthstone outlined.  

The company expects the cash portion of the consideration to be funded with cash on hand and borrowings under its senior secured revolving credit facility. In conjunction with the Titus acquisition, Earthstone revealed that it has obtained $400 million of incremental commitments from existing lenders.

In June 2022, net production of the Titus assets averaged around 31,800 barrels of oil equivalent per day, according to Earthstone. The assets are described by Earthstone as low-cost, high-margin producing assets generating significant free cash flow. The deal is expected to increase Earthstone’s net production by 18,000-23,000 barrels of oil equivalent per day in the fourth quarter of 2022.

“The Titus acquisition continues our path of building scale in the Permian Basin, increasing our daily production to around 100,000 barrels of oil equivalent per day upon closing,” Robert J. Anderson, the president and CEO of Earthstone, said in a company statement.

“We had a goal of adding to our recently established Northern Delaware Basin position and are excited about this transaction and the drilling inventory we are acquiring as it is among the highest economic locations in the Permian Basin,” he added in the statement.

“As we have continued to demonstrate from prior acquisitions, we believe that the price for this acquisition is highly attractive, with our ability to buy the assets at less than 2x PDP cash flows using current NYMEX strip prices. We are also obtaining six wells in progress and 86 potentially highly economic net locations which will be incorporated into our drilling plans as quickly as possible,” Anderson went on to say.

In April this year, Earthstone announced the closing of the acquisition of assets of privately held Bighorn Permian Resources LLC in the Midland Basin. The cash consideration for the Bighorn acquisition was reduced from a previously announced $770 million by approximately $131 million to $639 million and the equity consideration was reduced from a previously announced approximately 6.8 million shares of Class A Common Stock by approximately 1.2 million shares to 5.7 million shares, both based on preliminary purchase price adjustments, Earthstone highlighted.

In December 2021, Earthstone announced that it had entered into an agreement to acquire the assets of privately held Chisholm Energy Holdings LLC located in the northern Delaware Basin of New Mexico. The aggregate purchase price of the Chisholm acquisition is approximately $604 million consisting of $340 million in cash at closing, subject to customary closing adjustments, $70 million of deferred cash due over the 12 months after closing and approximately 19.4 million shares of Earthstone's Class A common stock, Earthstone noted at the time.

To contact the author, email andreas.exarheas@rigzone.com


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