Silver Run II merger forms $3.8 billion company in the STACK

By Patrick C. Miller | August 18, 2017

Silver Run Acquisition Corp. II has entered into an agreement to combine with Alta Mesa Holdings LP and Kingfisher Midstream LLC to form a company with a combined value of approximately $3.8 billion.

Alta Mesa is an independent exploration and production company with assets in Oklahoma’s STACK play. Kingfisher gathers, processes and markets hydrocarbons in the STACK play. Once the transaction is complete, Silver Run II is expected to be renamed Alta Mesa Resources Inc.

"We formed Silver Run II with the objective of acquiring low-breakeven, stacked-pay, oil-weighted assets, preferably with an integrated related midstream platform,” said James Hackett, chairman and CEO of Silver Run II, who will serve as executive chairman of the new company.  “The combination of Alta Mesa and Kingfisher is a perfect strategic match for our desired integrated platform.”

Founded in 1987 and based in Houston, Texas, Alta Mesa is a leading pure-play exploration and production company focused on the STACK play in the Anadarko Basin. With approximately 120,000 contiguous net acres and about 4,200 identified drilling locations, Alta Mesa is among the largest and most active operators in the STACK. 

Alta Mesa has drilled 205 STACK horizontal wells since 2012 to further delineate and de-risk its approximate 300 square mile position in the up-dip oil window of the STACK. Alta Mesa has completed 173 of these wells and put 167 on production. Based upon production through the second quarter of 2017, Alta Mesa expects EURs at year end to exceed 650 MBOE per well or approximately 140 BOE per foot of lateral.

Kingfisher Midstream is a private company with a leading position in the STACK play with Alta Mesa serving as its anchor producer.  Kingfisher's assets include over 300 miles of pipeline, 50,000 barrels of crude storage capacity, and 60 MMcf/d of gas processing capacity. An additional 200 MMcf/d cryogenic plant expansion is expected to begin operations in the fourth quarter of 2017.  The company has about 300,000 gross acres from Alta Mesa and five other third-party customers in the STACK.

“Alta Mesa's highly contiguous core acreage position in Northeast Kingfisher County has among the lowest breakevens in the U.S. at around $25 per barrel,” Hackett said. “Kingfisher adds a highly strategic and synergistic midstream subsidiary with significant additional third party growth potential.  We are excited about the possibilities for the combined company, including a potential future midstream IPO.”

Harlan Chappelle, Michael Ellis—founder of Alta Mesa—and Michael McCabe will respectively continue as CEO, COO and CFO of Alta Mesa Resources Inc.

The transaction is subject to the approval of Silver Run II stockholders and the satisfaction or waiver of other customary closing conditions, including the expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The transaction is expected to close in the fourth quarter of 2017.