Oil and gas developer Brookside Energy (ASX: BRK) has announced another divestment of its STACK Play holdings in the Anadarko Basin of Oklahoma, US, further validating its acreage revaluation commercial strategy.
The US-focused company has generated over US$1.47 million in proceeds from this second sale, which works out to be about US$15,300 per acre for a mix of partially developed and undeveloped acreage.
The asset, referred to as the RA Minerals Royalty package, was acquired by Brookside in March 2016 for about US$878,000, which is around US$9100 per acre.
In addition, the price per acre achieved from the sale represents about 80% of the estimated “fully developed” PV10 value per acre.
By comparison, the first sale of some of the company’s STACK holdings in May achieved about 72% of estimated PV10 value per acre.
Brookside’s business model involves acquiring acreage and utilising its undeveloped proved reserves to boost the property’s valuation for resale.
The company leases all or a portion of the undeveloped acreage in a drilling unit (section of land), then a drilling company or joint venture funds 100% of the cost of an initial well. Brookside then books 100% of the reserves attributable to the proved undeveloped wells in the unit.
Brookside managing director David Prentice said this second divestment provided further validation of this business model, which was “clearly working”.
“We strongly believe that the greatest value for our shareholders comes from acquiring the very best undrilled acreage, unlocking the value as wells get drilled and the reserve potential of each acre becomes apparent,” he said.
“We are very confident as we now continue our work to significantly increase the scale of the business.”
The proceeds from the sale are planned for reinvestment in further working interest leasehold acquisitions in the 35,000-acre Swish area, located in the southern portion of the Scoop oil and gas play.
“The proceeds from this sale can now be re-invested in our ongoing leasing efforts in Swish where we believe we can create very significant value,” Prentice said.
He added that the investment capital generated from this sale of almost 100 acres effectively leverages the company into acquiring around 1000 acres.
Brookside is targeting an approximate 8000-acre operated position within the Swish area, which includes a minimum of 10 drilling units.
Shares in the company rose 7.14% to A$0.015 on the news by midday trade.