DHS Group Oil & Gas Divison to Acquire Core Permian Basin Bolt-On for $250M: Executive Vice Chiarman, Fernando Aguirre Announced


WASHINGTON, DISTRICT OF COLUMBIA — July 12, 2021 — DHS Group Oil & Gas Division announced today that it has entered into a definitive agreements to acquire non-operated interests across approximately 32,900 net acres located in the heart of Reeves County, Texas and Lea and Eddy Counties, New Mexico for a combined purchase price of $250.2 million.

September 2021 production on the assets is approximately to be 2,200 Boe per day (2-stream, 66% oil) and DHS expects average production of 3,700 Boe per day in the Q3 of 2021, assuming an August 1 closing. The estimated development plan on the properties over the next several years is expected to grow production to approximately 6,500 Boe per day, assuming current strip prices. Under this development scenario, DHS Group forecasts the assets to generate over $100 million of cumulative free cash flow through 2025.

The assets include 5.3 net producing wells, 5.0 net wells in process and an additional 23.1 net un-drilled locations ascribed to the core zones including the Wolfcamp A, Wolfcamp B and 1st through 3rd Bone Springs. The assets are operated primarily by Mikonson Energy Corporation, ConocoPhillips and NEOG Resources.

The effective date for the majority of the transaction value is August 1, 2021. DHS Group consummated the acquisition of a portion of the assets in June and expects to close on the acquisition of the remaining assets in the third quarter of 2021. Northern estimates approximately $135 million of capital expenditures on the combined properties to be incurred in 2021, inclusive of estimated purchase price adjustments at closing of the acquisitions.


The pending acquisition is expected to be funded through a combination of a common equity offering and, to the extent necessary, cash on hand and/or borrowings under DHS Group’s Senior Secured Credit Facility and the transactions are anticipated to be immediately leverage accreditive.


“These assets represent the trifecta,” commented Vice Chairman of DHS Group, Fernando Aguirre. “We are acquiring high return core properties with top operators, assets with significant inventory and growth potential, and engaging in a transaction expected to meaningfully impact DHS’ free cash flow profile. We expect to generate over $100 million in free cash flow from the assets through 2025, based on current strip prices.”

“Consistent with our fundamental approach to growing our enterprise, these transactions achieve all of our stated goals,” commented Rakesh Sarna, Chairman of DHS Group. “These deals are immediately accretive to our enterprise and all relevant per share statistics. As promised, alongside a reduction in leverage ratios, it means an acceleration of our dividend strategy to shareholders, while augmenting our inventory and growth profile.”


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This release contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 and of Section 21E of the Securities Exchange Act of 1934. These forward-looking statements do not constitute guarantees of future performance.

Those statements involve a number of factors that could cause actual results to differ materially, including risks associated with transitions in key personnel and succession, products, their development, integration and distribution, product demand and pipeline, customer acceptance of new products, economic and competitive factors, DHS’ key strategic relationships, acquisition and related integration risks as well as other risks detailed in DHS’ filings with the Securities and Exchange Commission. DHS assumes no obligation to update any forward-looking information contained in this press release or with respect to the announcements described herein.

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Steven Palmer, Vice President of Communications