The acquisition adds nearly 15Mboe/d of production and 315,000 net acres across Oklahoma for Contango

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Image: Through the acquisition, Contango adds nearly 15Mboe/d of production and 315,000 net acres across Oklahoma. Photo: courtesy of skeeze from Pixabay.

Texas-based Contango Oil & Gas has agreed to acquire the assets of White Star Petroleum and certain affiliates for $132.5m (£107.68m) as part of the latter’s Chapter 11 bankruptcy sales process.

White Star Petroleum, which operates in the mid-continent region of Oklahoma, filed for bankruptcy protection in May 2019 in order to facilitate a restructuring.

The deal with White Star Petroleum enables Contango to add nearly 15Mboe/d of production, around 20Mmboe of PDP reserves, and 315,000 net acres across Oklahoma.

The Oklahoma-based company’s assets are located across STACK play, Anadarko and Cherokee, which put together, represent an acreage of nearly 314,800 net acres, while holding 575 operated wells and 318 non-operated wells.

Contango CEO comments on the transaction

Contango president and CEO Wilkie Colyer said: “This opportunity became actionable as a result of our recent successful recapitalization of the company, and it is exactly the type of acquisition we said we’d be looking for when we last spoke to the investment community.

“We expect White Star to add approximately $60 million in asset level cash flow over the next twelve months. It increases the Company’s production by a factor of almost four times and more than doubles our PDP reserves, all at a very attractive purchase price that is substantially below PDP PV-10.”

Most of White Star Petroleum’s production is liquids at 63% oil and natural gas liquids (NGLs), while 80% of its acreage is in production.

According to Contango, nearly 65% of the wells in the acquired acreage are operated by White Star Petroleum and are mature fields having strong cash flow and substantial development potential from PDNP and PUD opportunities.

The acquired assets also include integrated gathering and saltwater disposal systems, which are expected to cut down lease operating expenses and add third party cash flow, said the Texan oil and gas company.

The deal will be subject to customary conditions, due diligence, approval from the bankruptcy court and other factors with closing expected to occur in the fourth quarter of this year.

Earlier this month, Contango agreed to acquire nearly 159,872 net acres located in North Louisiana and the Western Anadarko Basin in Western Oklahoma and the Texas Panhandle for $23m (£18.69m) from Will Energy.