An Eon Resources Inc. subsidiary—Eon Energy LLC—is acquiring interest in the Permian Basin’s South Justis Field in Lea County, New Mexico, Eon said June 20.
As part of the purchase and sale agreement with WPP NM LLC and Northwest Central LLC, Eon will trade a 94% working interest in the field for 1 million Eon Class A common shares—valued at approximately $510,000 based on the company’s June 19 closing price. Eon said the deal does not include cash consideration or assumption of debt.
The assets have an estimated $1.2 million of net cash flow.
Eon shares trading on the New York Stock Exchange American closed at $0.51 per share on June 19. Shares had dropped slightly to $0.50 by 10:30 a.m. CT on June 20 following news of the deal.
South Justis, located in the Permian’s Central Basin Platform, currently produces 108 bbl/d from 19 active wells. Original oil in place was 120 MMbbl of oil with 30 MMbbl produced to date. Eon believes well recompletions and new well drilling can produce another 15 MMbbl of recoverable resource.
Eon plans to use the same strategy as the sellers to increase production, the E&P said in a press release. Within the last three months, WPP and Northwest reactivated six wells to increase production by 50 bbl/d. Eon will turn 30 wells to production this year with an expected average of 5 bbl/d to 10 bbl/d per well for a field-wide production yield of 250 bbl/d to 400 bbl/d.
"Step one in development of South Justis Field is to return idle wells to production to double oil production. Step two is to stimulate existing wellbores using the same techniques the company successfully employs in our Grayburg Jackson Field," said Eon President and CEO Dante Caravaggio.
The field’s production zones are at a depth of 5,000 ft to 7,000 ft in the Glorietta, Blinebry, Tubb, Drinkard and Fusselman intervals. The property holds 5,360 leasehold acres with a total of 208 wells. Half of those wells produce oil and the other half are water injection wells.
WPP and Northwest Central will continue to operate the field for the next few months as Eon transitions existing field employees under its employment.
"We also plan to seek a drilling partner who will bring the necessary capital and expertise to develop the South Justis Field, with the same approach we are taking with our Grayburg Jackson Oilfield," Caravaggio said.
Eon subsidiary LH Operating LLC operates the company’s production in the Grayburg-Jackson Field, located in the Permian’s Northwest Shelf in Eddy County, New Mexico.
Effective June 1, the deal is expected to close June 20.