Yuma Energy Inc. (NYSE: YUMA) said Feb. 12 it will merge with privately-held Davis Petroleum Acquisition Corp. in an all-stock transaction.

Davis, based in Houston, is focused on acquisition, exploration and development of domestic oil and gas properties with average production of 1,533 barrels of oil equivalent per day (boe/d) in fourth-quarter 2015.

The company has operated conventional fields located onshore in South Louisiana and the upper Texas Gulf Coast. Its nonoperated properties include Eagle Ford and Eaglebine properties in East Texas, the release said.

Davis has about 4.8 MMboe of proved reserves, 64% proved developed, as estimated by Netherland, Sewell & Associates Inc. effective Dec. 31.

The acquisition is expected to add to Yuma's, also based in Houston, assets onshore central Louisiana. Yuma also has additional nonoperated assets in North Dakota's Bakken Shale and operated positions in California.

"Once the transaction is complete, Yuma expects significant G&A synergies associated with the merger and will be well positioned to take advantage of the collective portfolios of the combined companies, as well as to capitalize on the current environment, which we believe will provide opportunities to grow primarily through further consolidations and acquisitions," said Sam L. Banks, chairman and CEO of Yuma, in a statement.

According to the release, Davis has no bank debt and about $4.1 million of cash as of year-end 2015.

More than 90% of the common stock of Davis is owned by entities controlled or co-investing with Evercore Capital Partners, Red Mountain Capital Partners, and Sankaty Advisors.

Upon completion, Davis will become a wholly owned subsidiary of Houston-based Yuma.

Under the terms of the definitive agreement, Yuma will reincorporate in Delaware, implement a one for 10 reverse split of its common stock, and convert each share of its existing series A preferred stock into 35 shares of common stock prior to giving effect for the reverse split.

Yuma will also issue additional shares of common stock in an amount sufficient to result in about 61.1% of the common stock being owned by the current common stockholders of Davis.

Additionally, Yuma will issue about 3.3 million shares of a new series D preferred stock to existing Davis preferred stockholders, which is estimated to have a conversion price of about $5.70 per share, after giving effect for the reverse split. The series D preferred stock is estimated to have a liquidation preference of about $18.6 million at closing, and will be paid dividends in the form of additional preferred stock.

The boards of directors of both companies have approved the merger agreement and anticipate that it is in the best interest of both companies' stockholders, the release said. The companies anticipate completing the transaction around mid-year 2016.

All current officers of Yuma will serve in their same capacity in the combined company.

Upon closing, four of the five current Yuma board members will continue to serve on the combined company board.

Richard K. Stoneburner will serve as non-executive chairman, and Sam L. Banks will continue to serve as director, president and CEO. Directors James W. Christmas and Frank A. Lodzinski will also continue to serve.

Three additional directors will be nominated by Davis, bringing the size of the new board to seven.

The transaction is dependent upon the negotiation of a reserve-based credit facility with existing Yuma lenders and/or others, with a borrowing base of at least $44 million.

Jones & Keller, P.C., provided legal counsel to Yuma. Porter & Hedgers LLP provided legal counsel to Davis.

Roth Capital Partners was financial adviser to Yuma. Northland Capital Markets and Euro Pacific Capital have been retained by Yuma to assist with the preparation of stockholder materials and closing the transaction.