Ajax turns 2015 shale development plan into $900M-plus payout

By Luke Geiver | August 14, 2018

When Ajax Resources acquired assets located in the northern Midland Basin three years ago, most observers thought the acreage was along the northernmost edge of the basin and had only one prospective zone, according to Forrest Wylie, executive chairman of the Permian exploration and production company. Through its sale of the assets this year to Diamondback Energy for $900 million plus Diamondback stock for a total of $1.25 billion, the Ajax team believes it was right to invest in the assets back in 2015.

“I am proud of Ajax’s ability to prove up and execute on a very successful multi-zone program delivering repeatable, highly economic well results that compete favorably anywhere in the basin,” Wylie said.

The sale of the assets to Diamondback Energy—expected to close in October—include more than 25,000 net leasehold acres, an average production of 12,000 barrels of oil equivalent per day (88 percent is oil), 367 horizontal drilling locations with an average lateral length of 9,500 feet and saltwater disposal and fresh water access infrastructure.

Rich Little, Ajax CEO, said the transaction represents a logical transition for Ajax and Diamondback.

Kelso, a private equity investment firm that helped back Ajax in developing the acreage, was crucial to the success of Ajax, Little said. “We look forward to partnering with Kelso again on our next acquisition opportunity,” he said.

Diamondback paid for the new assets through a combination of cash on hand, cash proceeds from a sale of mineral interests to Viper Energy Partners, borrowings from the revolving credit facility and potentially a debt offering.

Roughly 220 of the drilling locations are capable of generating 100 percent or greater IRRs at $60/b across three zones, according to Travis Stice, CEO of Diamondback.