US-based Earthstone Energy has agreed to acquire the privately held oil and gas producer Bighorn Permian Resources in a cash and stock deal, worth approximately $860m.
Under the terms of the deal, Earthstone will make a cash payment of $770m and issue approximately 6.8 million of its Class A common stock, worth $90m.
Bighorn Permian Resources owns oil and gas assets, located in the Midland basin, in the US. These assets reported average daily production rates of nearly 42,400 barrels of oil equivalent per day (Boepd) during November 2021.
Bighorn holds over 110,600 net acres, most of which are located in the Reagan and Irion counties of the Midland basin.
The transaction, which will have an effective date of 1 January 2022, is scheduled for completion in the second quarter of 2022.
Earthstone plans to use cash on hand, proceeds from a private placement of equity, and borrowings under its senior secured revolving credit facility to fund the cash portion of the transaction.
Earthstone president and CEO Robert Anderson said: “Combining the Bighorn Acquisition with the four acquisitions completed in 202,1 and the pending Chisholm Acquisition, we will have more than quadrupled our daily production rate, greatly expanded our Permian basin acreage footprint, and increased our free cash flow generating capacity by many multiples since year-end 2020.
“The proximity of the Bighorn assets to existing Earthstone operations positions us to create further value by applying our proven operating approach to these assets, primarily in the form of reducing operating costs.
“The addition of the high cash flow producing assets from Bighorn to the strong drilling inventory of Earthstone, including the Chisholm Acquisition, furthers Earthstone’s transformation into a larger scaled, low-cost producer, with lower reinvestment in order to maintain combined production levels.”
The firm is due to close the previously announced acquisition of Chisholm Energy’s Delaware basin assets for $604m later this month.
Earthstone expects that the acquisition, including the pending Chisholm deal, will increase its net production by approximately 70%, adjusted EBITDAX by approximately 54%, and free cash flow by nearly 194% in 2022.