Earthstone Energy to Acquire Chisholm Energy’s Northern Delaware Basin Assets for $604 Million
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Earthstone Energy has entered into an agreement to acquire the assets of privately held Chisholm Energy Holdings located in the northern Delaware Basin of New Mexico. Chisholm is majority owned by Warburg Pincus and its affiliates.
“The Chisholm Acquisition caps off a series of highly-accretive and value-adding transactions that have dramatically transformed Earthstone during 2021 and further establishes Earthstone as a Permian Basin focused company with increasing scale. When this acquisition is combined with the previous four acquisitions completed in 2021, we will have increased our Permian Basin net acreage footprint by approximately 400 percent, almost tripled our daily production rate, and meaningfully increased free cash flow generation capacity,” said Robert J. Anderson, president and CEO of Earthstone.
“In particular, the Chisholm acquisition expands our operations into the Delaware Basin with low cost, high margin assets that are generating significant production and cash flow from existing producing wells while also providing growth opportunities from a high-return drilling inventory. Additionally, the significant size of this transaction increases our scale materially and positions us to build on our corporate and field level operating efficiencies and drive additional cost savings,” added Anderson.
“We are especially excited about the size and quality of the drilling inventory included in the Chisholm transaction, and plan to continue the two-rig program in the Delaware Basin in addition to our two-rig program in the Midland Basin. Our increased inventory of high-return drilling locations will enhance our organic growth. Through a four-rig drilling program in 2022 we expect to be free cash flow positive and continue our current momentum,” concluded Anderson.
The aggregate purchase price of the Chisholm Acquisition is approximately $604 million consisting of $340 million in cash at closing, subject to customary closing adjustments, $70 million of deferred cash due over the 12 months after closing, and approximately 19.4 million shares of Earthstone’s class A common stock valued at $194 million. The effective date of the Chisholm acquisition will be November 1, 2021, with closing anticipated in the first quarter of 2022. The cash portion of consideration is expected to be funded with cash on hand and borrowings under the company’s senior secured revolving credit facility. Earthstone has obtained commitments from a group of existing lenders to increase the borrowing base and elected commitments under its credit facility from $650 million to $825 million upon closing.
About Earthstone Energy
Earthstone Energy, Inc. is a growth-oriented, independent energy company engaged in the development and operation of oil and natural gas properties. Its primary assets are located in the Permian Basin of west Texas.
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