Rosehill spends $77M to double opportunity in Delaware Basin

By Luke Geiver | October 31, 2017

Rosehill Resources is making news again this year in the Delaware Basin. Rosehill was formed earlier this year when KLR Energy (a Special Purpose Acquisition Company) partnered with two other firms to enter into the Permian through the creation of Rosehill, Through a deal with an undisclosed seller, the company has added more than 4,500 undeveloped acres in the southern Delaware Basin.

Rosehill paid $77.6 million for 4,565 net acres that include producing properties along with an additional 4,535 net acres. The move gives the company more than 325 gross drilling locations that can target the Wolfcamp A, Wolfcamp B and Bone Spring benches. The Wolfcamp zones within the newly acquired acreage is localized in a depositional sweet spot, according to Rosehill. Several surrounding operators have already or are currently de-risking the Bone Springs bench.

Along with the prospect of drilling new wells, the company’s purchase will allow it to drill longer laterals. The contiguous acreage position it now has will let Rosehill drill 7,500 foot to 10,000 foot laterals. The working interest rate of the acres is 86 percent. The acreage is also held by production through four vertical wells or under lease term through at least 2020.

Alan Townsend, president and CEO of Rosehill, said the company acquired the acreage for $500,000 or less per drilling location. “We believe this acquisition is accretive to Rosehill and the full cycle economics will compete favorably with other parts of the Delaware Basin,” he said. Results from offset operators have been encouraging, he added. “There is potential across multiple stacked zones,” he said.

To pay for the purchase, Rosehill will use a combination of preferred equity or debt. The deal should close in late 2017, the company said.