International Western Petroleum Inc. (INWP) will receive all the assets of a privately held Houston-based E&P company in the Texas Gulf Coast region, through a definitive purchase and sale agreement that has been executed, the company said in a news release.
While not naming the seller, INWP said that all leases are along the Texas Gulf Coast and are conventional asset plays. The seller owns 18,100 acres of oil and gas leases with 36 active wells, according to INWP.
The acquisition consists of three phases, and includes the seller’s current producing assets and acquisition targets. Current production is 5,000 cubic feet per day (Mcf/d) of gas, and 42 barrels per day (bbl/d) of oil.
Taken together, the producing assets and acquisition targets constitute current production of about $2 million per month EBITDA, based on June production and pricing, and more than $1 billion of 3P reserves.
INWP will also assume about 55,000 acres and 258 wells (59 active), currently producing 400 bbl/d of oil and 8,700 Mcf/d of gas, in the acquisition targets.
The second phase of acquisitions, scheduled for Sept. 30, will provide a total of $17.2 million. Of this amount, $8.5 million will support the acquisition cost, and $8.7 million will support development cost.
The last phase of acquisitions, scheduled for Nov. 30, will provide a total of $26 million. Of this amount, $20 million will support acquisition cost and $6 million will support development cost.
The total purchase price of $2 million will be paid by Aug. 30, which is the scheduled closing date, International Western Petroleum said.
Operations to increase cash flow will be undertaken upon closing. The sale and purchase agreement allows INWP to issue five million shares of common stock and one million warrants to the seller.
Out of the $2 million cash payment from INWP at closing, $1.5 million will be used in the next 30 days for a development program designed to raise the seller’s current production by an additional 2 Mcf/d of gas and 80 bbl/d of oil, for a total net income projected at $535,000 per month as cash flow into INWP.
Combined assets, after the all-phase acquisition from the seller, including its acquisition targets, will be 73,100 acres with daily production of 15,700 Mcf/d of gas and 122 bbl/d of current oil production.
Upon the transaction’s closing, on the first phase of the acquisition with the $2 million capital injection, INWP shall assume the Houston-based office and a selected staff from the seller to continue operations on the acquired assets and production income.
International Western Petroleum Inc. is based in Irving, Texas.
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