American Patriot Oil and Gas has snapped up assets in the Permian basin.
The firm struck a deal with two private US companies to acquire 100% of the pair’s assets.
The transaction includes 22,311 net acres in Utah in Grand and San Juan Counties and 356 net acres in Texas in Gaines County. Gaines County is located in the middle of the Permian Basin.
The deal includes 23 well bores and 90boepd of existing conventional production.
However, American Patriot said that number could be increased to 800boepd by mid-2017 by reversing shut-ins carried out in the wake of the oil price decline. The takeover includes a string of mid-stream assets, including an existing gas plant and 25-mile pipeline previously developed by Delta Petroleum within the rospect.
American Patriot chief executive Alexis Clark said: “This is a landmark transaction for American Patriot to acquire Paradox and Permian Basin Oil and Gas assets fundamentally transforms the company putting it on the path to becoming a significant US oil production company with substantial mid-stream strategic assets. The production will generate immediate cash flow when the transaction is closed and the cash flow from these assets will put AOW on the path to being cash flow positive by the end of 2016. It is a testament to our ability to originate and execute deals in the onshore US market and we expect this is the first of many such deals to come as we have a number of additional deals in the pipeline.’
“To acquire theses key production and mid-stream strategic assets of the Gas Plant and Pipeline positions American Patriot well to develop a significant oil and gas production business including the ability to charge third party providers and generate tolling revenue. This is a once in a generation opportunity for AOW as if it wasn’t for today’s low oil price environment and the strict criteria oil bankers have, a company like AOW would rarely have an opportunity to acquire assets like these or any other assets we are looking to acquire. By undertaking an all stock transaction the sellers are also clearly demonstrating their belief in the asset and the management team at AOW as they want to realise the significant upside these assets can deliver within AOW’
“This strategy has the potential to deliver significant value for AOW shareholders particularly given the number of attractive distressed producing properties we have been introduced to’
“As a part of this transaction we expect to appoint two new US based board members to the company who will deliver increased opportunities to acquire valuable distressed assets, as well as introduce new investors, shareholders, and broker networks based in the USA providing AOW with significant on the ground, in house capability. More information on these key appointments will be announced in coming weeks.’
“This is the first acquisition of many and we have a number of target assets in the pipeline, as we look to deliver on the strategy of aggressively building a significant producing conventional oil business with well over 5000bopd production’ ‘We now have 90boepd of oil production which will generate immediate cash flow with the ability to grow this quickly to over 800bopd by the mid-2017 and potentially double that by end of 2017 by quickly restarting shut in production at low cost to the company. This is all underpinned by a certified 1P reserve base of 3mmbbl oil and 6,700 mmcf gas which is also expected to grow.’
“We expect to be in a position to regularly update shareholders on this growing business with regular news flow and announcements. The cash flow and production growth from this asset even at current oil prices will generate significant cash flow and revenue for American Patriot more than covering existing costs and importantly we will also be looking to dual list on the US stock market to attract further US investors.”
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