Carrizo Oil & Gas Inc.has agreed to acquire 15,000 net acres in the Eagle Ford shale of South Texas from an affiliate of fellow Houston firm Sanchez Energy Corp. for $181 million in cash.
The bolt-on acreage is primarily in the core volatile oil window of the Eagle Ford in LaSalle, Frio, and McMullen counties, Tex., comprising estimated net production in September of 3,100 boe/d, of which was 61% oil, from 93 net wells.
Net proved reserves, based on the Carrizo's internal estimates, total 14.5 million boe, of which 71% is oil with 56% developed.
The acreage is 100% operated with no additional drilling requirements.
Carrizo counts 80 net derisked drilling locations on the acreage based on a single layer development in the Lower Eagle Ford, and sees additional upside potential from stagger-stack development, infill drilling, and additional zones.
The deal is effective June 1 and is expected to close by mid-December. Following completion, Carrizo will hold more than 100,000 net acres in the Eagle Ford, concentrated in LaSalle, McMullen, and Atascosa counties.
Based on the firm’s current development spacing assumptions, which include only a single layer within the Lower Eagle Ford, the acquisition will increase Carrizo's drilling inventory in the play to 1,100 net locations.
Carrizo also reports that its estimated production volumes during the third quarter were 40,762 boe/d, an increase of 13% vs. the third-quarter 2015 average. The year-over-year production growth was driven by results from the firm’s Eagle Ford and Delaware basin assets, as well as a lower level of voluntary curtailments in its Marcellus shale assets.
Companywide oil production during the third quarter averaged 24,488 b/d, while natural gas and NGL output averaged 69,262 Mcfd and 4,730 b/d, respectively.
From Sanchez’s perspective, the divestiture is consistent with its strategy to increase liquidity, improve its balance sheet, and focus on growth of its Eagle Ford Catarina asset, where more than 1,350 “high-quality” drilling locations have been identified.
Sanchez earlier this month agreed to sell its 50% interest in Carnero Processing LLC, which it jointly owns with Targa Resources Corp., and noncore producing oil and gas assets in South Texas as part of a $107-million deal with Sanchez Production Partners LP (SPP).
Carnero Processing is building the Raptor cryogenic natural gas processing plant, which is slated to begin operations in early 2017. Sanchez’s Catarina area will be connected to the plant through the Carnero Gathering System, owned by Carnero Gathering LLC, also a 50-50 joint venture with Targa. Sanchez in July agreed to sell its 50% interest in Carnero Gathering LLC to SPP.
The producing assets to be sold to SPP include working interests in 23 producing Eagle Ford wellbores in Dimmit and Zavala counties, Tex., together with escalating working interests in an additional 11 producing wellbores in Palmetto field in Gonzales County, Tex. The assets cover 700 boe/d of projected production in 2017.
Contact Matt Zborowski at [email protected].