Brookside Energy revels in effective commercial strategy boosted by strong oil prices

Brookside Energy ASX BRK oil Stack Play Oklahoma
Brookside Energy acreage divestment achieves US$28,600 per acre, representing a multiple of greater than 10-times on the average acquisition cost per acre.

Oil company Brookside Energy (ASX: BRK) is continuing to make hay of rising oil prices with by announcing a strong result track record over the past few months.

Its strong performance has been underpinned by a resilient oil market that has seen oil prices breach US$70 per barrel for the first time since November 2014.

Brookside recently sold some of its non-operated working interest leasehold acres in one of the seventeen development units it currently owns in so-called Stack Play in Oklahoma.

Brookside’s commercial strategy is to acquire undeveloped acreage and utilise existing production and underdeveloped reserve estimates as a “catalyst for acreage revaluation”.

In a market of rising oil prices, this strategy is paying off handsomely with the oiler announcing an acreage sale price of US$28,600 per acre compared to a price paid of US$2,500, acquired in 2016.

This represents a multiple of greater than 10-times on the average acquisition price paid, reflecting the significant interest in the secondary market for acreage in the Anadarko Basin in Oklahoma, the company’s prime focus point. Furthermore, Brookside says the price per acre it achieved in this divestment was significantly higher than the US$16,000 weighted average achieved over the last two years of intensive merger and acquisition activity in the region.

Acreage revaluation strategy

Brookside said that its recent divestment of acreage represents a relatively small amount of its broader holdings in the basin, estimated to several thousand acres in total.

“The executed sale price reflects the significant interest in the secondary market for acreage in the Anadarko Basin,” the company said in a recent statement to the market.

Brookside added that it is “aggressively pursuing” a leasing campaign within a 35,000-acre region it calls the Swoosh Play, aimed at identifying and securing further working interest acreage.

The oiler is targeting an 8,000 acre “operated position” that includes at least 10 drilling units with unit sizes ranging from 320 acres to 1,280 acres. At its Stack play, its ongoing efforts have secured around 160 non-operated working interest leasehold acres spread across 6 “soon-to-be-drilled” 1,280-acre spacing units.

“We are delighted to be able to report the results of this strategic sale of acreage from within our Stack Play holdings. This transaction has demonstrated to our shareholders and to the market generally the validity of our business model,” said Mr David Prentice, managing director of Brookside Energy.

“We are very confident that the greatest leverage for our shareholders comes from acquiring the very best undeveloped leasehold acreage we can and then unlocking the value as wells get drilled and the reserve potential of each acre becomes apparent. The model is clearly working, and we are now focused on increasing the scale of the opportunity through our leasing efforts in Swish,” said Mr Prentice.

George is an award-winning market analyst who has authored articles and editorial opinion pieces for multiple publications around the world. He has written about a wide variety of topics including financial markets, stocks, trading, politics and economics.