Centennial adds to Delaware Basin portfolio

01 December 2016, Week 47. Issue 436

On November 28, Denver-headquartered Centennial Resource Development announced that it was acquiring oil and gas assets in Reeves County, Texas from Silverback Exploration for US$855 million.

The deal, which includes 100% of Silverback’s Reeves County leasehold interests and related upstream assets, will give Centennial additional net production of about 3,500 boepd.

An affiliate of private equity fund Riverstone Holdings initially entered into a purchase agreement with Silverback to acquire the assets. Then on November 27, Riverstone and Centennial entered into an agreement. Under this, the Riverstone affiliate agreed to assign, and Centennial agreed to assume, Riverstone’s right to purchase the assets, subject to certain conditions. Centennial is also backed by Riverstone.

Centennial will acquire about 35,000 net acres (142 square km) directly offsetting its existing acreage in the county, 95% of which is operated with roughly an 88% average working interest. The company said the acquisition included at least 600 horizontal drilling locations, based on spacing of 880 feet (268 metres). Of this, it estimates around 210 locations to be prospective for the Upper Wolfcamp A, roughly 180 locations prospective for the Lower Wolfcamp A and around 220 for Wolfcamp B.

The assets have a projected undeveloped resource potential of around 600 million boe from the Wolfcamp A and Wolfcamp B, with additional upside potential anticipated from the Bone Spring, Avalon and Wolfcamp C plays.

The acquisition also boosts the company’s extended lateral development, increasing its operated extended lateral locations by 136%.

“While we did not expect to make such a significant acquisition so quickly, we could not pass up the opportunity to accretively add core acreage offsetting our existing Centennial assets at such a compelling price,” Centennial’s CEO, Mark Papa, said.

“Pro forma for the transaction, Centennial will be one of the largest operators in the Delaware Basin, with over 77,000 contiguous net acres [312 square km].”

Centennial’s horizontal drilling inventory will go up 44% once the deal closes, and its 2020 production goal will increase from 30,000 boepd to 50,000 boepd.

The acquisition is due to close on December 30.

Centennial was established earlier this year through the combination of Centennial Resource Production and Silver Run Acquisition.

 

Edited by

Anna Kachkova

Editor

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