Colgate Energy Partners' $190 million purchase of 22,000 net acres in Eddy and Lea counties, announced earlier this week, is a good deal for the company, Colgate Co-CEO Will Hickey said in a news release.
The bolt-on acreage deal is expected to offset Colgate’s existing operations in both counties, according to the company news release posted to Business Wire on Nov. 7.
"The acquisition of this high-quality asset base adds to our existing inventory in the Northern Delaware Basin, where we have recently drilled some of the best wells in the company’s history," Hickey said. "Given the depth of our current inventory, we have a very high bar for acquisitions and this one was just too good to pass up."
Rig activity will be allocated to the properties next year, according to the release.
Based in Midland, Texas, Colgate is an independent oil and natural gas company.
The company's definitive agreement with an undisclosed seller is subject to the usual closing adjustments. The acquisition was financed through cash and borrowings, and the transaction was finalized in September.
The transaction is expected to take effect in the first quarter of next year.
The majority of the acreage directly offsets Colgate's legacy Parkway operating area and boasts an average 8/8ths net revenue interest of over 80% and is more than 95% operated with an about 78% average working interest.
The acquisition will dovetail nicely with other of the company's transactions, Colgate Co-CEO James Walter said in the news release.
"Building on the transformative transactions completed earlier this year in Texas, this New Mexico acquisition adds to Colgate's position as one of the premier private operators in the Permian Basin," Walter said. "Our focus when making acquisitions continues to be adding highly economic inventory that will drive enhanced returns and free cash flow while maintaining low leverage."
The acquisition also will be good for Colgate's bottom line, Walter said.
"Colgate's strong balance sheet and ample liquidity allows us to execute a cash transaction of this size while continuing to target 2022 leverage of less than 1.0x," Walter said.