June 15 (Reuters) – Earthstone Energy Inc (ESTE.N) said on Thursday it would buy Novo Oil & Gas Holdings for $1.5 billion in a bid to boost its presence in the Delaware Basin.
Delaware Basin, a part of the wider Permian Basin, is a prime target for producers looking to increase their inventory.
The shale patch, which lies between Texas and New Mexico, has the necessary infrastructure and is known for high productivity and large undeveloped reserves.
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Earthstone & Novo Wells Drilled Since 2022
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Delaware Oil & Gas Operator List
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Earthstone said in 2022 it advanced its consolidation strategy, closing three deals totaling $2 billion, including two northern Delaware Basin asset acquisitions.
Northern Oil and Gas Inc (NOG.N) would also buy some working interests in privately held Novo, backed by EnCap Investments, for $500 million, resulting in a $1 billion purchase price net to Earthstone, according to the statement.
With production volumes from the Novo deal, Earthstone expects the near-term output levels to surpass 135,000 barrels of oil equivalent per day (boepd).
Map of Earthstone & Novo Wells Drilled Since 2022 (click to access)
“The addition of approximately 200 high-quality, low breakeven locations deepens our drilling inventory and with our flat rig count, extends our inventory life significantly to over a decade,” said Earthstone CEO Robert Anderson.
The Novo deal is expected to close in the third quarter of 2023, Earthstone said. Separately, Northern Oil said its portion of the deal is expected to close in August.
According to Earthstone, the Novo deal is expected to be funded with cash on hand and borrowings under the company’s credit facility.
The company also said it sold certain non-core assets in the Midland Basin in Texas for cash proceeds of about $56 million, on May 31. The divested assets included production of about 530 boepd.
Earthstone said it would continue to consider other non-core asset sales as appropriate in the future.
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