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Property Acquisition and Operating Leases
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9 Months Ended |
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Sep. 30, 2012
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| Property Acquisition and Operating Leases [Abstract] | |
| Property Acquisition and Operating Leases |
Property Acquisitions and Operating Leases
In February 2012, we contracted a drilling rig for a term of two years to support our horizontal drilling program in the Permian Basin. The drilling rig was delivered in April 2012, and lease costs recorded during the three and nine months ended September 30, 2012 was $2,327 and $4,283, respectively. Lease payments will approximate $6,611 in 2012 (with $2,328 remaining at September 30, 2012), $9,234 in 2013 and $2,619 in 2014. The agreement includes early termination provisions that would reduce the minimum rentals under the agreement, assuming the lessor is unable to re-charter the rig and staffing personnel to another lessee, to $4,434 in 2012 (with $1,689 remaining at September 30, 2012), $5,475 in 2013 and $1,350 in 2014.
During February 2012, the Company acquired approximately 16,020 gross (14,470 net) acres in Borden County, which is located in the northern portion of the Midland Basin. The northern portion of the Midland Basin has had limited drilling activity compared with the southern portion of the Basin (where our current production is located), increasing the risk of success for these drilling activities. The purchase price of $15,000 was funded from existing cash balances.
On June 8, 2012, the Company signed a purchase and sale agreement to acquire 2,319 gross (1,762 net) acres in southern Reagan County, Texas for a total purchase price of $12,000, which was financed with a draw on the Company's Senior Secured Credit Facility. The transaction had an effective date of May 1, 2012 and closed on July 5, 2012.
During the third quarter of 2012, we acquired an additional 8,375 gross acres (5,940, net) in the northern portion of the Midland Basin for a total consideration of $4,133. Subsequent to September 30, 2012, we acquired an additional 1,024 net acres in this area of the Midland Basin for $717.
In addition to the consideration paid for each of the above referenced leasehold additions, the Company's unevaluated property balance of $45,672 at September 30, 2012 includes the development and facility costs incurred in 2012 on these properties.
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