Eagle Ford 2
Lonestar Resources has closed an acquisition of producing properties in the Eagle Ford Shale play. Lonestar paid $38.7 million for a 3,084 gross / 2,706 net acres in the Sugarkane Field in DeWitt County, Texas from Sabine Oil & Gas Corporation and Alerion Gas AXA, LLC.
The properties, 95% of which are operated, currently produce 800 boe/d from 20 wells. Estimated annualized EBITDAX from this level of production is $6 million. The effective date of the acquisition is August 1, 2018. Lonestar has identified 26 Lower Eagle Ford drilling locations, with additional drilling potential in the Upper-Lower Eagle Ford, the Upper Eagle Ford and the Austin Chalk.
Lonestar internally estimates that Proved reserves associated with the acquisition total 13.0 MMBOE, 3.2 MMBOE of which is Proved Developed Producing. 100% of these reserves are associated with the Lower Eagle Ford Shale. Based on the NYMEX Strip on November 15th (the day of closing), the Proved reserves have PV-101 of $77.0 million.
To account for the additional volumes associated with the acquired producing wells, Lonestar is raising its 2019 outlook. The Company is increasing its 2019 production outlook from a range of 13,000 – 14,000 boe/d to 13,700-14,700 boe/d and increasing its 2019 EBITDAX outlook from a range of $140–$160 million to $145–$165 million.
Lonestar also announced that its wholly-owned subsidiary, Lonestar Resources America Inc., has closed an upsized and enhanced Senior Secured Credit Facility. Lonestar’s borrowing base was increased from $190 million to $275 million. As of September 30, 2018, and proforma for the Acquisition, borrowings under the Credit Facility were $163.9 million, leaving $111.1 million of liquidity available under the new borrowing base. Lonestar’s Credit Facility has also been amended favorably to the Company in that: 1) the interest rate grid that the Company pays has been reduced by 0.5%; and 2) the term of the Credit Facility was extended from July 2020 to November 2023.
Lonestar’s Chief Executive Officer, Frank D. Bracken, III, commented, “This acquisition is a continuation of Lonestar’s core strategy of accretively expanding its Eagle Ford Shale position while maintaining a returns-focused investment approach. We have added meaningfully to our position in DeWitt County, in an area that features some of the thickest Lower Eagle Ford Shale in the Sugarkane Field. We believe the application of our Geo-Engineered drilling and completion process can yield highly productive wells that yield attractive rates of return on invested capital. As is typically the case with our acquisitions, we see potential to increase lateral lengths and further enhance returns.”
Bracken concluded, “In combination with our expanded and enhanced Credit Facility, we have financed the Acquisition in a manner that leaves Lonestar with the highest level of liquidity in the Company’s history while expanding our Eagle Ford Shale position in an attractive part of the play.”
