Page 13 - NorthAmOil Week 27 2022

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INVESTMENT to expand even further through potential acqui- Developed PV-10 as of 8/1/22 with reserves of
sitions or enhance stockholder returns through approximately 28.9mn boe; Estimated $320-
Ring Energy announces other potential return of capital opportunities.” 340mn of next 12 months Adjusted EBITDAX
from Proved Developed Producing based on
Ring Energy, July 05 2022
agreement to acquire Earthstone Energy 8/1/22 effective date; Low-cost, high-margin
producing assets generating significant Free
Stronghold’s Permian announces northern Cash Flow; Approximately 7,900 net acres (65%
operated, 78% WI, 93% HBP) in the core of the
basin assets Delaware Basin in Lea and Eddy Counties, New
Mexico; High-return, de-risked drilling inven-
Ring Energy has entered into an agreement to Delaware Basin asset tory with 114 gross/86 net locations comprised
acquire the assets of privately-held Stronghold acquisition for $627mn of 61 gross/46 net operated high-graded loca-
Energy II Operating and Stronghold Energy II tions focused on 2nd and 3rd Bone Spring and
Royalties. Stronghold’s operations are located Earthstone Energy has entered into an agree- Wolfcamp A/XY formations with an additional
primarily in Crane County, Texas and focused ment to acquire the New Mexico assets of Titus 53 gross/40 net operated locations from second-
on the development of approximately 37,000 Oil & Gas Production and Titus Oil & Gas ary targets; Titus is currently utilising three rigs
net acres in the Permian Basin’s Central Basin Production II and their affiliates located in the to drill six wells (93% working interest) in Lea
Platform (CBP). Stronghold is majority owned northern Delaware Basin. Titus is privately held County, with completions expected late in the
by Warburg Pincus, a leading growth investor. with sponsorship by investment funds managed third quarter of 2022.
Consideration for the Transaction, subject by NGP Energy Capital Management. Impact on Earthstone: Expected to increase
to customary closing adjustments, consists of: The aggregate purchase price of the Titus net production by 18,000-23,000 boepd (65%
$200.0mn in cash at closing; $15.0mn deferred Acquisition is approximately $627mn consist- oil) in the fourth quarter of 2022; Earthstone
cash payment due six months after closing; ing of $575mn in cash and approximately 3.9mn intends to maintain two rigs in the Delaware
$20.0mn of existing Stronghold hedge liability; shares of Earthstone’s Class A common stock Basin and two rigs in the Midland Basin with an
and $230.0mn in Ring equity based on a 20-day valued at $52mn based on a closing share price additional rig being considered for the Delaware
volume weighted average price (‘VWAP’) of of $13.51 on June 24, 2022, both subject to cus- Basin after closing; Expected increase in capital
$3.60 per common share as of June 30, 2022, tomary closing adjustments. The effective date of expenditures in the fourth quarter of 2022 of
all of which will be issued to the owners of the Titus Acquisition will be August 1, 2022, with $25-50mn;
Stronghold. closing anticipated in the third quarter of 2022. Increases Earthstone’s Delaware Basin acre-
Paul D. McKinney, Chairman of the Board The cash portion of the consideration is expected age position to about 44,000 net acres and its
and CEO, commented: “We are excited to to be funded with cash on hand and borrowings broader Permian Basin acreage position to
announce the agreement to acquire Strong- under the Company’s senior secured revolving about 256,000 net acres; Expected impact on
hold’s conventional asset base, which we expect credit facility. In conjunction with the Titus Earthstone’s guidance for the remainder of the
will further diversify our commodity mix and Acquisition, Earthstone has obtained $400mn year dependent upon timing of closing and will
provide increased optionality on multiple fronts of incremental commitments from existing be provided after closing; Maintains conserv-
upon closing. The Transaction truly comple- lenders, increasing elected commitments under ative balance sheet metrics with low leverage;
ments our existing footprint of conventional-fo- the Credit Facility from the current $800mn to Forecasted increase of 0.1x in Debt/Last Quarter
cused Central Basin Platform and Northwest $1.2bn upon closing. Earthstone’s current bor- Annualised (LQA) Adjusted EBITDAX at year-
Shelf asset positions in the Permian Basin. We rowing base is $1.4bn and is expected to increase end 2022 allows for maintenance of targeted
intend to leverage our extensive expertise in with the Titus Acquisition. sub-1.0x Debt/LQA EBITDAX; Increase in share
applying the newest unconventional and con- Titus Asset Highlights: June 2022 net pro- count of only 3%, driving significant immediate
ventional technologies to optimally develop duction has averaged about 31,800 boepd (65% per share accretion; Anticipated total common
Stronghold’s deep inventory of investment oil, 83% liquids) from 44 gross / 37 net oper- share count of about 142.4mn shares upon clos-
opportunities. We believe the Transaction will ated wells and is inclusive of about 1,200 boepd ing and with the expected conversion of the out-
provide for a material increase in our size and from non-operated interests; $857mn Proved standing convertible preferred stock;
scale, and more importantly, will be immedi-
ately accretive across all of the key operational
and financial metrics for Ring’s existing stock-
holders. On closing, we expect to nearly double
our production, reserves and forecasted free
cash flow with assets that we know well. We also
expect to capture meaningful synergies from this
acquisition.
“Once we complete the Transaction, we
will have materially increased our inventory of
high rate-of-return drilling, recompletion and
workover projects, and fully expect to increase
our activity across our expanded footprint. The
combination of lower operating costs and a sub-
stantially expanded inventory of high-margin,
capital efficient development opportunities is
expected to increase free cash flow and our abil-
ity to rapidly pay down debt. This will allow us

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