American Patriot Oil & Gas (ASX: AOW) is close to finalising a flurry of recent buys that are expected to generate annual revenue of more than US$10 million, according to its second quarter results.
The exploration and development company announced several new acquisitions over the last quarter (ended 31 December 2017), which have collectively added 500 barrels of oil equivalent per day to its production profile and, based on current market prices of US$65 per barrel, is expected to generate about US$95 million in revenue over a period of time.
American Patriot also achieved maiden production and booked first cash flows from its recently acquired Anasazi assets in South Texas, with net income during the quarter coming in at A$56,146.
“Production and revenue is expected to increase significantly as additional transactions are closed and production enhancements are implemented in recently acquired oil and gas fields,” the company reported.
American Patriot’s business strategy involves acquiring distressed assets at a low cost and giving them new life.
In the second half of 2017, the company made five transactions to acquire conventional oil and gas acreage in Texas and the US Gulf Coast.
The biggest deal was the November signing of a letter of intent to acquire assets in East Texas, doubling American Patriot’s proven reserves to 2 million barrels.
An independent reserve report and full engineering study has been completed on the assets, with further due diligence including land title and environmental work currently underway.
The purchase and sale agreement for the deal is close to being finalised, with financial close anticipated in late February, American Patriot reported.
The company’s private, off-market transaction to acquire South Texas assets from HJH Resources is also expected to close next month, with just land title and environmental due diligence to be carried out beforehand.
In addition, American Patriot has commenced rework activities at its Lost Lake and Goose Creek oilfields to restart shut-in production, which it expects to be back on line in early 2018.
American Patriot’s debt facility, provided by US lender Arena Investors and announced in September last year, is currently on track to close in early February.
Funds from the facility are expected to be used to “undertake a number of material acquisitions in the next 12 months that will have the potential to significantly grow the production, cash flow and reserves base of the company and generate significant value for shareholders”.
American Patriot said due diligence was currently being completed on assets that are more than five times the size of recent acquisitions.
“With this pipeline of deals, 2018 is looking to be a significant year for American Patriot as it looks to build production to well over 2000 boepd,” the company stated.
American Patriot also holds existing acreage in Montana and Colorado, which it is currently marketing to new potential joint venture partners as it turns its focus to the Texas and Gulf Coast assets.