Carrizo adds to Eagle Ford focus, acquires Delaware Basin assets

By Luke Geiver | July 05, 2017

Carrizo Oil & Gas has agreed to acquire roughly 24,000 gross acres located in the Delaware Basin in a deal that is linked to oil prices. The exploration and production firm with an Eagle Ford focus, has agreed to pay ExL Petroleum Management $648 million for the Delaware acres. And, the company has agreed to a deal stipulation that would send an additional $50 million per year to ExL if West Texas Intermediate crude prices average more than $50 per barrel in any calendar year during 2018 to 2021. The maximum Carrizo would have to pay ExL through the price- and year-linked stipulation is $125 million.

The asset package includes producing horizontal wells and wells awaiting completion or to be brought onto production. ExL has been running four drilling rigs to maintain leasehold obligations, but Carrizo said it could run two to three rigs and still maintain the proper leasehold requirements needed for the newly acquired acreage in Reeves and Ward counties.

Horizontal wells on the acreage have targeted the Wolfcamp A, Upper Wolfcamp B and the Lower Wolfcamp B. In total, Carrizo believes it could develop 350 additional well locations. In the future, wells could also target up to seven more oil-saturated zones, including the Avalon, Bone Springs 1, 2 and 3, the Wolfcamp X/Y and the Wolfcamp D zones.

While wells in the acreage are currently drilled with laterals reaching 7,300 feet, Carrizo’s team believes laterals could eventually reach 10,000 feet. Chip Johnson, president and CEO of Carrizo, said the new assets are among the best the company has seen since it began exploring the possibility of acquiring assets in the Delaware.

“With this acquisition, we believe we have assemble core positions with a deep inventory of future drilling locations in two of the highest-return plays in North America—the Eagle Ford and Delaware Basin. Our plan going forward is to focus our efforts on these two regions and, as a result, we have elected to begin a monetization process for our non-core assets and expect to use the proceeds from these dispositions for debt reduction,” Johnson said.

The day after announcing its acquisition plans, Carrizo issued a public offering of senior notes at a cost of $14.50 per share.