Laredo Petroleum has entered into a purchase and sale agreement for additional acreage within the company’s existing Midland Basin footprint for $125 million. The acquisition will add approximately 9,200 net acres to Laredo’s position, with roughly 6,300 acres in the Spraberry interval and 2,900 acres in the Spraberry, Wolfcamp, Canyon, and Cline zones.
The acquisition secures additional rights to the Spraberry interval, enables the drilling of additional 10,000-foot or longer locations, facilitates the new Western Glasscock production corridor and increases the Company’s working interest in current leasehold in western Glasscock and Reagan counties, Texas. Production from the acquisition includes approximately 300 net barrels per day from wells operated by Laredo through and increase in working interest.
The additional acreage in western Glasscock County will enable Laredo to build the new Western Glasscock production corridor, developing the entire block with 10,000-foot or longer laterals and utilization of Laredo’s Earth Model to optimize location selection and completion design.
“This acquisition combines the acreage attributes and strategic investments that are drivers of the company’s capital efficiencies,” commented Randy A. Foutch, Chairman and Chief Executive Officer. “Acquiring additional Spraberry rights, utilizing the Earth Model to optimize location selection and completion design and drilling long laterals along the new Western Glasscock production corridor enables the company to efficiently develop this large, contiguous acreage block in western Glasscock County.”
A portion of the acquisition has already closed for approximately $92.7 million, with the remaining interest to close when preferential purchase rights and consents are satisfied and obtained.
Stock Issuance
In coalition with the acquisition agreement, Laredo announced the issuance of common stock. The company will issue a total of 14,950,000 shares (including the share allocation for underwriters) and the proceeds from the sale will be approximately $139.1 million.
The company intends to use the net proceeds from the sale of the shares to repay borrowings under its senior secured credit facility incurred for working capital purposes and to fund the purchase price of the company’s recently announced asset acquisition.
Laredo Petroleum had 222.9 million shares outstanding prior to the announcement. The additional 14.95 million shares that were issued represent a dilution of 6.7% on the stock. In trading today, the stock is down roughly 4%.
Permian Basin Acquisitions
The Midland Basin has been rife with activity in the last month. Devon Energy and Pioneer Natural Resources consummated a deal in mid-June with 28,000 net acres being acquired from Devon by Pioneer for $435 million. Devon also sold additional assets in the area. In April, Parsley Energy acquired 22,908 acres in the Midland Basin for $359 million, and in May acquired 30,000 acres in the Delaware basin for $280.5 million. Yesterday, Diamondback Energy snapped up 19,000 acres in the Delaware Basin for $560 million.
