After shedding some assets, Arabella Exploration Inc. will gain access to Delaware and Midland basin properties in a deal valued at $47 million.

The transaction more than quadruples the company’s net acreage and ups production by 15%.

The Fort Worth, Texas-based company said July 22 it entered into agreements with a third party buyer and McCabe Petroleum Corp. to sell its ownership interest in certain Permian Basin properties for cash and assets.

Pursuant to the agreements, Arabella will transfer its Locker State, Graham, Woods, Jackson and Emily Bell prospects to the buyer.

In exchange, Arabella will receive $15 million in cash from the buyer and certain properties from McCabe.

Arabella Exploration, Midland, Delaware, Permian Basin, McCabe Petroleum
The McCabe properties include:
  • Producing property in the southern Delaware Basin with net production of about 88 barrels of oil equivalent per day; 
    • An estimated value of about $6 million; and
  • A participation agreement covering 20,000 gross/net undeveloped acres in the Midland Basin; 
    • An estimated value of about $20 million.

Additionally, Arabella has an option to purchase from McCabe about 1,000 net acres of royalty interests underlying the 20,000 acres in the Midland Basin for about $3 million.

As part of the deal, Arabella will also receive about 1 million of its ordinary shares and the rights to certain earn-out shares valued at about $3 million. The shares will be canceled upon receipt provided they may be reissued in the event that Arabella doesn't drill at least one well on its new property within one year from the closing date.

Arabella anticipates the transactions will close by July 31, subject to certain closing conditions. The transactions will close simultaneously.

Proceeds will primarily be used to pay $10 million of the Arabella's $16 million outstanding senior secured notes. The remaining proceeds will be used to repay other debts, the development of properties and general corporate purposes.

Arabella is focused on formations in the Wolfbone play, including the Wolfcamp and Bone Spring shales.

The company was formerly known as Lone Oak Acquisition Corp. and was incorporated in the Cayman Islands on June 2010 as a “blank check” company whose objective was to acquire an operating business.

Emily Moser can be reached at emoser@hartenergy.com, and Darren Barbee can be reached at dbarbee@hartenergy.com.