Earthstone Energy to Acquire Warburg-backed Midland Basin Operator in $185.9 Million Deal
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Earthstone Energy has entered into a definitive agreement to acquire Independence Resources Management (IRM), a privately held independent E&P company backed by Warburg Pincus and its affiliates and operating in the Midland Basin.
The aggregate purchase price of the transaction is expected to be approximately $185.9 million consisting of an estimated amount of $135.2 million in cash as of November 30, 2020 and approximately 12.7 million shares of Earthstone’s Class A common stock valued at $50.8 million based on a closing share price of $3.99 on December 16, 2020. The transaction is expected to close in the first quarter of 2021.
“This transaction is another important step in the execution of our growth strategy to further increase our scale with high-quality accretive acquisitions. This is consistent with our stated strategy to be a consolidator in the Permian Basin and positions us well for additional value-enhancing transactions. We will maintain strict financial discipline as we consider future transactions, both as it relates to valuation and to maintaining our balance sheet strength,” said Robert J. Anderson, president and CEO of Earthstone.
“The addition of these complementary Midland Basin assets increases our production and adjusted EBITDAX by approximately 50 precent with minimal impact to leverage. Additionally, we will be adding 70 gross high-graded drilling locations from IRM’s core acreage that carry a similar return profile to our highly economic Midland Basin wells and will compete with our existing inventory for future development capital. With the large majority of IRM’s production coming from its core acreage in Midland and Ector counties, the acquired assets have a very similar and complementary low operating cost, high margin profile as our existing assets, allowing us to maintain our peer-leading cash margin operating profile,” added Anderson.
The transaction has been unanimously approved by the board of directors of Earthstone and by the members of IRM. No further approvals are required. In conjunction with the transaction, Warburg will have the right to appoint one director to Earthstone’s board of directors. EnCap Investments will maintain the three existing EnCap-affiliated directors, resulting in a board of directors consisting of nine members. No changes to Earthstone management will occur in connection with the transaction.
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 Midland Basin of west Texas and the Eagle Ford Trend of south Texas.
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