"Goodrich Petroleum Corporation (the "Company") today announced it has entered into a definitive agreement to purchase a 66.7% working interest in producing assets and approximately 277,000 gross acres in the Tuscaloosa Marine Shale ("TMS") for $26.7 million, with an effective date of March 1, 2013, subject to customary closing adjustments. The remaining 33.3% working interest owner in the producing assets and leasehold has elected to retain its interest and participate with the Company in developing the assets. The acquisition is subject to customary due diligence and is expected to close on or before August 22, 2013.
The gross oil production associated with the properties averaged approximately 750 barrels of oil per day for March 2013. At closing, the Company will own approximately 320,000 net acres in the TMS when combined with its current position. The Company will prioritize the acreage with the ultimate number of retained acreage to be based on geologic location, timing and amount of lease extension payments, and future rate of development of the play.
The Company plans to fund the acquisition with its senior credit facility, which along with available cash had approximately $190 million of available liquidity pro forma at March 31, 2013. Upon closing of the transaction, the Company's borrowing base will increase by $18 million to $243 million."
I conclude that this is a brilliant, strategic move by Goodrich to expand their position in this emerging play. Devon's operational approach, and now their sales price, will baffle many for years to come. I commend Goodrich for their confidence in the play, their team, and the gusto to expand their position. This acquisition makes them the largest acreage holder in the play. The Devon acreage provides a better balance to Goodrich's existing acreage from a depth perspective. I believe that the deeper acreage with higher GOR's will present excellent results. The company's position now covers a greater span of the oil/gas window. In addition, the core of Devon's position will produce better results than some of their existing fringe acreage. Due to the mature state of Devon's leases, Goodrich will need to quickly rationalize the combined portfolio and get a few rigs active. Having Sinopec stay in the project is also very positive. It will be interesting to see if Sinopec will be offered the opportunity to expand into Goodrich's existing position.
With a large amount of the Devon acreage expiring, it's hard to calculate an accurate price per acre sales price. Sinopec's buy-in with Devon on five projects in January, 2012 at $5000 per acre might have been a little high.
I have to think that in the near term, many operators will use my favorite Jim Mora quote, "Woulda, shoulda, coulda".