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Crescent Energy Boosts Portfolio with Eagle Ford Acquisition: Expands Non-Operated Assets
06/20/2023
Big announcement! Crescent Energy is set to bolster its inventory in the play by acquiring operated and working interests from Mesquite Energy.
Crescent Energy Co. seals a $600 million cash deal to acquire assets in the Eagle Ford Shale from Mesquite Energy Inc. (formerly Sanchez Energy).
Crescent has announced that their definitive purchase agreement with Mesquite Energy grants them operatorship and working interests, leading to a substantial expansion of Crescent's presence in the Eagle Ford region. This deal builds upon the shale play's impressive streak of successful mergers and acquisitions, which began with a strong first quarter. The assets acquired from Mesquite Energy encompass approximately 75,000 contiguous net acres, predominantly situated in Dimmit and Webb counties, Texas.
Growth and Operational Control in Eagle Ford
- The acquired asset brings a large, proven inventory with significant growth potential, effectively doubling Crescent's operated Eagle Ford inventory. Crescent sees additional upside in the Austin Chalk and Upper Eagle Ford formations.
- Crescent is acquiring over $700 million of proven developed producing PV-10 value, reflecting the asset's financial value and stability.
- The transaction is expected to immediately enhance operating cash flow, free cash flow, and net asset value, showcasing the positive financial benefits for Crescent.
- Post-transaction, Crescent will significantly increase its non-operated interest from approximately 15% to around 50% in the acquired assets. Crescent will operate approximately 90% of its Eagle Ford position, consolidating operational control and establishing a prominent presence in the region.
- The acquisition expands Crescent's base of predictable cash flow, with the acquired assets currently producing an average of about 20,000 barrels of oil equivalent per day (boe/d), mostly consisting of liquids (70%). The asset's 12-month decline rate of 17% provides stability and consistent production levels.
“As operator, we look forward to engaging with all stakeholders to improve performance and maximize value across this high-quality asset base,” David Rockecharlie said.
According to Crescent CEO, this acquisition solidifies the company's position as a leading consolidator in the Eagle Ford region. He stated that it aligns with their long-standing strategy of low-risk acquisitions and exploitation.
Having been an active non-operated owner of these assets for the past six years, they are well acquainted with them and foresee significant potential for growth by increasing their scale and assuming operational control. As the operator, they are eager to collaborate with all stakeholders to enhance performance and maximize the value of this exceptional asset base.
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The Williston Basin is a big area filled with layers of rock that sits next to the Rocky Mountains in western North Dakota, eastern Montana, and the southern part of Saskatchewan in Canada. This area covers roughly 110,000 square miles. Geologically, it's very similar to the Alberta Basin in Canada. People started drilling for oil in the Williston Basin back in 1936, and by 1954, most of the land where oil could likely be found was already claimed for drilling. The Bakken Formation with parts of Montana, North Dakota, Saskatchewan, and Manitoba has become one of only ten oil fields globally to yield over 1 million barrels per day (bpd) since the late 2000s. It is currently the third-largest U.S. shale oilfield, behind the Permian and Eagle Ford. The boom in the Bakken started around September 2008, coinciding with the U.S. housing market crash. The application of new technologies, such as swell packers enabling multiple-stage fracturing, significantly enhanced oil recovery, making the Bakken Formation a key player in the U.S. In 2022, the Bakken oil field saw big improvements in how much oil and gas it could produce. At the start of the year, 27 drilling rigs were working there, more than double the 11 rigs from the start of 2021. Important upgrades included making the Tioga Gas Plant able to process 150 million cubic feet more gas each day, and making the Dakota Access Pipeline bigger, increasing its oil transport capacity from 570,000 to 750,000 barrels every day.
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