Lonestar (LONE) To Acquire Eagle Ford Assets For $116 Million

Texas-based energy explorer Lonestar Resources US Inc. (NASDAQ:LONE) recently inked agreements with unnamed sellers to acquire oil and gas properties in Eagle Ford. The deal will more than double the company’s asset base in the South Texas shale play.

While Permian Basin is considered to be the most attractive shale play with 361 drilling rigs due to its favorable geology and low service costs, Eagle Ford shale also looks very promising. The South Texas play almost tripled its rig count in the last one year to 85 last week, up from 29 a year ago. Many independent oil and gas producers have acquired large acreage and production positions in Eagle Ford shale recently. A couple of weeks ago, Wildhorse Resource Development Corp. (NYSE:WRD) struck a $625 million deal to purchase 111,000 net acres in Eagle Ford. Earlier this month, Sanchez Production Partners LP (NYSE:SPP) and Blackstone Energy Partners – energy focused unit of Blackstone Group L.P. (NYSE:BX) also acquired acreage in Eagle Ford.

Deal Highlights

Per the deal, Lonestar will purchase over 21,000 net acres in the Eagle Ford shale in South Texas, increasing the net leasehold of the company by 59% in the region. The acreage is in Gonzales, DeWitt, Lavaca and Fayette counties and is expected to add about 31.4 million barrels of oil equivalent to the company’s proved reserves portfolio. Lonestar will acquire 115 gross producing oil and gas wells owning a 70% working interest in the producing wells and a 93% working interest in operating 81 wells.

The acquisition of the Eagle ford properties is likely to enhance the scale and size of Lonestar boosting shareholder’s value. It will drive the production and reserves of the company by 39% and 70% respectively.

The total purchase price of the acquisition is approximately $116 million and the company plans to fund it through a combination of $105 million cash and 2.6 million common stock. The deal is expected to close in late June.

Post the announcement of the deal, Lonestar revised its 2017 drilling and competition expenditure from $62 million to $72 million.

Zacks Rank

Headquartered in Fort Worth, U S., Lonestar is an oil and gas company engaged in exploration, production and acquisition of unconventional oil and gas reserves. The company under the Zacks categorized US Oil & Gas Exploration and Production carries a Zacks Rank #3 (Hold).

Lonestar Resources US Inc. Price

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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