Bonanza Creek Energy Inc. (NYSE: BCEI) nearly doubled its position in the Wattenberg after announcing a deal May 22 in which the company will pay $5,000 an acre for land in Weld County, Colo.

Bonanza will pay $175.5 million in cash and issue up to 1.1 million shares of stock for about 86,400 gross (34,600 net) acres and net production of about 700 barrels of oil equivalent per day (boe/d), 85% of which is oil. The transaction gives BCEI about 70,000 acres in the play.

BCEI’s average working interest in the acquired properties is 40%, but more than 23,000 net acres have average working interests of 63%. The buyer was not disclosed.

Marvin Chronister, Bonanza Creek's interim president and CEO, said, “These assets represent a natural bolt-on that fits with the high priority criteria we seek in all potential acquisitions: predictability, alignment with core areas and competencies, accretive to shareholders and pro forma capital structure that remains within our stated leverage tolerances.”

The acquisition features two largely contiguous asset positions, to the north and south of and adjacent to, BCEI’s existing leasehold. This provides the company opportunities to leverage current infrastructure and operational expertise in this area.

The northern block of acreage directly offsets the Wells Ranch development area. It consists of about 25,700 net acres. Of this amount, 8,700 net acres are held by production. The southern block of acreage is about 8,900 net acres, of which 4,600 net acres are held by production.

BCEI said the acquired assets would support an estimated 1,700 gross (700 net) 3P locations in the Niobrara B and C benches and the Codell Formation, based on initial spacing assumptions of 80 acres in the Niobrara B and C benches and 160 acres in the Codell.

Mike Kelly, a senior analyst for Global Hunter Securities LLC, said the deal should alleviate concerns by others of an inherent “inventory problem” at BCEI.

“The company now makes claims to 2,000 future wells and a 25-year inventory based on current activity levels,” Kelly said in a report. “Prior to this announcement, management had repeatedly stated that it would only do a deal if it was an obvious positive. This definitely fits the criteria.”

BCEI’s 40-acre Niobrara test, which featured 28-stage fracks, also posted strong initial rates of 477 boe/d, which is 4% more than the 30-day rate implied in BCEI's 313 Mboe type-curve. It is also 25% higher than the 40-acre results given with first-quarter earnings, Kelly said.

“This should provide confidence that management’s 3P assumptions on its existing acreage, which dials in 40-acre spacing for the B & C Niobrara zones, is still within reach. However, we think the market will need to see stacked 40-acre tests before assigning full credit,” he said.

The transaction is expected to close in the third-quarter with an effective date of June 1, 2014.