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Property Acquisition and Operating Leases
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6 Months Ended |
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Jun. 30, 2012
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| Property Acquisition and Operating Leases [Abstract] | |
| Property Acquisition and Operating Leases |
Property Acquisitions and Operating Leases
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. The transaction had an effective date of May 1, 2012 and closed on July 5, 2012. The Company intends to initiate a horizontal drilling program focused on the Wolfcamp B shale, and currently estimates that the leasehold acquisition will add 19 horizontal Wolfcamp B drilling locations. The acquisition also includes seven vertical Spraberry wells, five of which were producing with the remaining two awaiting completion. In connection with the acquisition, the Company paid a $1,200 deposit prior to closing, which is included in unevaluated property at June 30, 2012.
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. The Company has an average 90% working interest across the contiguous acreage positions and is the operator. After completing in the second quarter a 3-D seismic survey on our acreage position, we commenced the drilling of an exploratory vertical well in July 2012.
Subsequent to June 30, 2012, we acquired an additional 3,586 gross acres (2,732, net) in the northern portion of the Midland Basin for a total consideration of $1,770.
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 six months ended June 30, 2012 was $1,956. Lease payments will approximate $6,611 in 2012, $9,234 in 2013 and $2,606 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, $5,475 in 2013 and $1,350 in 2014.
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