Ring Energy has entered an agreement to acquire Central Basin Platform assets in the Permian Basin assets for $75 million cash, according to a July 11 news release.
Ring said it would buy approximately 3,600 net acres in Ector County, Texas from Founders Oil & Gas IV LLC. The E&P said the assets are similar to those Ring acquired from Stronghold Energy Operating II LLC in 2022.
Founders’ assets include second quarter 2023 production that averaged 2,500 net boe/d, 86% oil. Ring said the deal adds “low-risk inventory” including approximately 50 undeveloped drilling locations. Existing infrastructure offers takeaway capacity and opportunities to reduce costs and improve efficiencies.
Ring said the $75 million price tag is approximately 2.3x the assets’ next twelve months adjusted EBITDA beginning April 1, 2023.
The assets include 99% working interest and net revenue interest of approximately 87%. Ring said reserves include 9.2 MMboe, 80% oil, “characterized by shallow declines and long lives.”
Payment for Founders’ assets, subject to customary closing adjustments, will consist of $60 million in cash at closing and a $15 million deferred cash payment due four months after closing.
The transaction will be funded with cash on hand and borrowings under Ring’s recently reaffirmed senior revolving credit facility. The deal comes after Ring recently divested acreage in the Permian’s Delaware Basin to an unidentified private buyer.
Total consideration of $75 million, subject to customary closing adjustments, consists of $60 million in cash at closing and $15 million deferred cash payment due four months after closing. The Transaction will be funded with cash on hand and borrowings under Ring’s recently reaffirmed senior revolving credit facility.
Paul D. McKinney, Ring’s board chairman and CEO said the assets strategically expand the company’s operations in the southern portion of the Central Basin Platform, “allowing us to capture operating cost and G&A synergies associated with a larger core operating area.”
“These assets are similar to the Stronghold assets acquired last year, having stacked pay zones of high-quality rock with proven performance,” he said. “Like the Stronghold assets, we intend to leverage our extensive expertise applying the newest conventional and unconventional technologies to optimally develop the inventory of undeveloped drilling locations afforded by the transaction.”
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McKinney said the acquisition increases production while allowing Ring to reduce expected capital spending for the second half of 2023 and further pay down debt.
The transaction is expected to close in the third quarter with an effective date of April 1, 2023. Raymond James advised Ring Energy on the transaction.