After cobbling together about 5,700 net acres in the Midland Basin through multiple deals, RSP Permian Inc. (NYSE: RSPP) quietly tacked on more Midland acreage at a better price.

RSP Permian added working interests in about 844 net acres and 29 net horizontal drilling locations in Martin and Glasscock counties, Texas. The bolt-on cost about $39 million, the Dallas-based company reported in its third-quarter 2015 earnings on Nov. 2.

In August, RSP said it completed multiple bolt-on acquisitions in its existing core operating areas in the Midland Basin for about $274 million.

The company ended up getting the additional interests for roughly $0.80 on the dollar, said Brian Gamble, director of research at Simmons & Co. International, in a Nov. 2 report.

RSP paid about $1.35 million per location for the additional interests, Gamble said. In the original purchase, the company handed over about $1.69 million per location, he added.

The closed acquisitions total 6,548 net acres and 191 net horizontal drilling locations. The properties have 1,680 barrels of oil equivalent per day (boe/d) of production.

More A&D?

RSP is eyeing even more acreage in the Midland Basin.

In October, the company said it had entered a potential deal to acquire 4,100 net acres in the basin for $137 million. The deal, currently held together by a letter of intent, is a privately negotiated transaction between RSP and Wolfberry Partners Resources LLC, an entity owned in part by affiliates of the company.

In sync with the deal, RSP launched and completed a follow-on equity offering of 8.74 million shares. The company received $178.6 million of net proceeds from the offering, which will be set aside to fund a portion of the potential acquisition.

The acquisition will include 86 net horizontal drilling locations in the Middle Spraberry, Lower Spraberry, Wolfcamp A, Wolfcamp B and Wolfcamp D. RSP plans to start drilling on the properties as soon as the company can close the deal, said Steve Gray, CEO.

If a purchase and sale agreement (PSA) can be reached, the transaction is expected to close in the fourth quarter of 2015, Gamble said.

“We still believe this closes without a problem,” he said.

Operations Results/Outlook

For the third quarter, RSP posted a net income of $9 million, up from a net loss of $5.5 million in the second quarter.

The company said it decreased cash operating expenses in the third quarter by 23% to $10.50 per boe as compared to the second quarter.

The company also completed fall borrowing base review for its undrawn revolving credit facility with its lenders. The lenders have decided to increase the borrowing base of the company's revolver to $600 million from $500 million.

Total capex, excluding acquisitions, was reduced to a range of about $400- to $420 million following the third quarter. The company expects nonoperated capex in 2015 to represent about 15% of total capex.

In the fourth quarter, RSP will drop to three operated horizontal rigs from four. The reduction is due to the weakness in current oil prices, Gray said.

Average daily production in 2015 has been increased to a range of 20,750-21,250 boe/d as a result of the company’s drilling results.

“Overall, good production and cost control combined with capital discipline is not flashy, but overall a solid quarter from RSP,” Gamble said.

In its third-quarter earnings, RSP revealed early well results for the company's four extended reach lateral wells in the Spanish Trail area in Midland County, Texas.

The company completed the four Spanish Trail wells (two Wolfcamp A and two Wolfcamp B) with average lateral lengths of more than 11,000 feet and an average of 53 stages.

The Spanish Trail wells are still cleaning up and flowing with strong initial production (IP) rates, the company said. The IP rates reached an average 24-hour peak exceeding 1,750 boe/d

In total, the company completed 11 operated horizontal wells (five Lower Spraberry, two Wolfcamp A and four Wolfcamp B) and five operated vertical wells during the third quarter.

Based on continued strong well performance and successful spacing pilots, RSP recently increased its type curves and EURs for wells drilled in the Middle Spraberry, Lower Spraberry and Wolfcamp A zones.

RSP is increasing its 2015 guidance due to stronger than anticipated results through the first three quarters of 2015, the impact of recent acquisitions and the anticipated drilling and completion pace for the remainder of the year.

The company plans to moderate the pace of completions during the fourth quarter. As a result, about 19 operated horizontal wells are anticipated to be carried over into 2016.

"We plan to adjust our pace of development when oil prices recover," Gray said.

At the end of the third quarter, RSP had 16 operated horizontal wells and one operated vertical well awaiting completion activities.

RSP expects to complete 45 gross operated horizontal wells and 19 gross operated vertical wells in total for 2015.

Contact the author, Emily Moser, at emoser@hartenergy.com.