Texas-based Earthstone Energy has agreed to acquire certain oil and gas assets in the northern Midland Basin in the US from Sabalo Holdings for around $950m.
In this regard, Earthstone Energy will acquire 100% of Sabalo Holdings’ interests in Sabalo Energy, LLC (Sabalo) and Sabalo Energy whose assets include producing and non-producing assets in the northern Midland Basin.
Sabalo has signed a separate deal to buy certain well-bore interests owned by Shad Permian, which were part of a drilling joint venture between the two companies.
Upon closing of the two deals, Earthstone Energy expects to add 20,800 net acres in the Midland Basin and an estimated 488 gross operated horizontal drilling locations to go along with 349 gross non-operated horizontal drilling locations.
The Texan oil and gas company has proposed to pay $650m in cash and issue $300m worth shares to Sabalo Holdings for the acquisition.
Put together the average estimated production of Sabalo and Shad for the month of September 2018 was around 11,200 Boe/d with about 83% being oil.
Sabalo, which is based in Corpus Christi, Texas, is a portfolio company of EnCap Investments.
Earthstone Energy said that the acquisition of Sabalo gives it a large, contiguous acreage position with a deep inventory of favorable economic drilling locations apart from expanding its presence in the Midland Basin to a great extent.
Earthstone Energy president Robert J. Anderson said: “The Sabalo Acquisition is an important milestone in our ongoing transformation into a premier Midland Basin focused operator. We have delivered on our goal, as stated after our 2017 acquisition of Bold, to significantly increase our operated acreage and inventory of highly economic locations.
“With the addition of this especially attractive contiguous acreage to our existing Midland Basin assets, we have positioned Earthstone to capitalize on increased scale and strong asset quality in order to generate significant returns.”
The company anticipates closing the deal in late 2018 or in the first quarter of 2019, depending on the satisfaction of customary closing conditions, including the approval of its shareholders.