Earthstone Energy Inc., based in Texas, announced the transaction on June 28: the acquisition of Titus Oil & Gas which will raise production in the Delaware Basin by 26%.
The $627 million acquisition fills the Permian Basin in Eddy and Lea counties, N.M. with 86 net locations on 7,900 net acres of leasehold, while it is not clear how much of the leasehold might be on federal acreage.
It is Earthstone's seventh acquisition since 2021, a span that includes the closing of approximately $1.89 billion in acquisitions in the Permian Basin.
The purchase of Titus Oil & Gas Production LLC and Titus Oil & Gas Production II LLC, privately held companies backed by NGP Energy Capital Management LLC, is estimated at $575 million in cash and it is the equivalent of $52 million in stock (3.9 million shares of its Class A common stock based on the June 24 closing price).
According to June 17 strip prices, Earthstone valued Titus' proved developed PV-10 at $857 million as of August 1, meanwhile, it estimates the next 12 months of adjusted EBITDAX at $320 million to $340 million.
Titus shared that its net production in June was 31,800 boe/d. The company had reserves of approximately 28.9 MMboe. Earthstone is sure its net production will increase, at the midpoint, by 20,500 boe/d (65% oil) in the fourth quarter.
Titus is running a three-rig drilling program on six wells with a 93% working interest in Lea County now. Earthstone considers it will maintain two rigs in the Delaware Basin, two rigs in its Midland Basin position, and add a new rig in the Delaware upon closing the deal. It would increase its Capex by as much as $50 million.
Only after closing the deal, the impact of the acquisition on Earthstone's guidance for the remainder of the year will be noticeable. Earthstone said its second half production would be about 78,000 boe/d, following its $860 million acquisition on June 2.
As the president and CEO of Earthstone Energy Inc, Robert J. Anderson said, the Titus acquisition followed the way of building scale in the Permian Basin, growing its daily production to around 100,000 boe/d upon closing. Its main goal is adding to a newly established northern Delaware Basin position as it continues to pursue synergies from the two acquisitions completed since the beginning of 2022.
Earthstone's board and the boards of the Titus entities all approved the deal unanimously. Haynes and Boone LLP and Jones & Keller P.C. represent Earthstone and Bracewell LLP and Jefferies LLC acted as the exclusive financial adviser of Titus.
