Southern Delaware Basin
In July 2016, the Company purchased one-half of the seller’s interest in approximately 12,100 gross undeveloped acres (~ 5,000 net acres) for up to $25 million in the Southern Delaware Basin of Texas, currently one of the most active and economically attractive oil and gas basins in the United States.
We spud our first well, the Lonestar Gunfighter 1813 #1H, in the Southern Delaware Basin of the Permian on October 15th, targeting the Upper Wolfcamp formation, and look forward to an active 2017 program given success similar to those experienced by our offset operators. We anticipate spudding an additional two wells by the end of this year, and anticipate initial production from the first well in late December or early January. We were also fortunate to be able to raise approximately $50 million dollars in a publicly marketed equity offering during the quarter that will provide additional financial flexibility to fund the acquisition and development of our Permian position.
Specifics of the purchased acreage are as follows:
- Located in western Pecos County, Texas.
- Primary focus is three benches (Wolfcamp A, Wolfcamp B and emerging Bone Springs formations), all of which have proven to be productive in the area by offset operators, thereby providing us with the equivalent of 36,000 "effective" gross acres over the three formations.
- Average Wolfcamp interval of approximately 400 feet and Bone Springs interval of approximately 2,000 feet.
- Acquiring operated average working interests of approximately 41% (32% net revenue interest).
- 160 gross potential locations spread over the three potential formations that offer excellent returns, even at current commodity prices and current estimated drilling and completion costs - using internally estimated average production type curves based on offset operations data and assuming drilling of 10,000 foot laterals.
- Additional upside exists in future downspacing and additional zones being delineated within the thick Bone Springs section and/or Middle and Lower Wolfcamp intervals.
- Acreage is adjacent to and surrounded by current horizontal Wolfcamp activity.
- Active offset operators included Samson Oil & Gas, J. Cleo Thompson, Brigham Exploration, and Concho Resources, among others.
- Existing infrastructure in place to service development of asset.
- No significant near term expirations.