Penn Virginia Corporation (PVAC) announced that it has entered into a definitive agreement to acquire assets in the Eagle Ford Shale, primarily in Gonzales and Lavaca Counties, from Hunt Oil Company for $86 million in cash, subject to customary post-closing adjustments. The Company anticipates the acquisition will close on or before March 1, 2018, with an effective date of October 1, 2017. The acquisition is expected to be funded with borrowings under the Company’s credit facility.
- Expands the Company’s core net leasehold position by approximately 13%, or 9,700 net acres (substantially all acreage is held by production) in Area 1, of which 5,700 net acres are currently operated by Penn Virginia. The Company’s operated net Eagle Ford acreage will increase from 93% to more than 99% as a result of the transaction;
- Includes production of approximately 1,870 barrels of oil equivalent per day (BOEPD), of which approximately 89% is oil and 75 de-risked net lower Eagle Ford locations;
- Adds PDP reserves of approximately 3.8 million barrels of oil equivalent (MMBOE), of which approximately 86% is oil; total resource potential is estimated at more than 29 MMBOE;
- Provides economies of scale which will increase the Company’s cash operating margin since no additional G&A or drilling rigs are required to capture value; and
- Accretive to Penn Virginia under all measures, including earnings, cash flow and net asset value per share. Acquiring acreage at an estimated price of approximately $2,100 per net acre, including net production value of approximately $65.5 million ($35,000 per flowing BOEPD).
John A. Brooks, President and Chief Executive Officer of Penn Virginia, commented, “This bolt-on acquisition is an excellent fit at an attractive price, increasing our working interest in properties we already own but did not operate. It will establish the Company as operator in 99% of its Eagle Ford assets and improve our ability to optimize our development plan across Area 1. The production is nearly 90% crude oil like most of Penn Virginia’s acreage in Area 1, which receives premium LLS pricing as compared to WTI. The acquisition will increase our net drilling inventory by 17% while requiring no additional G&A expense. Through the combination of increased production and working interest provided by the acquisition, we anticipate full year 2018 production to grow approximately 120% from 2017, and have revised guidance accordingly.”