After hitting their lowest level since October 2017 last week, shares of U.S. Energy Corp. (NASDAQ:USEG) are making a move on Wednesday to reach a two-week high on news of a possible acquisition.
The Denver-based independent energy company said this morning that it has inked a non-binding memorandum of understanding to acquire oil and natural gas producing properties targeting the vaunted Bakken formation of North Dakota.
Located in Eastern Montana and Western North Dakota, the Bakken is one of the largest oil developments in the U.S. in the last half-century.
Thanks to hydraulic fracturing and other advanced drilling techniques, the Bakken boom led the charge in ND oil production going from about 100,000 barrels of oil per day (bopd) in 2008 to a peak of 1.4 million bopd towards the end of 2014. A lull followed, but activity in the basin is starting to pick back up again.
USEG struck the agreement with APEG I Partners to acquire all of APEG’s interest in 67 wells concentrated in Williams and McKenzie Counties, North Dakota, essentially doubling the company's existing portfolio in the oil-rich region.
Completing the acquisition will mean USEG takes control of roughly 1.1 million barrels of oil equivalent of proved developed reserves (79% oil) and 400 barrels of oil equivalent per day of current production across 1,600 net acres. Moreover, USEG management sees the acquisition as an opportunity for acreage swaps that will allow them to keep consolidating the company's leasehold position in the Bakken.
Payment for the assets is set at $17.8 million per the MOU, broken down into cash, common and preferred USEG stock and the assumption of APEG's outstanding commodity derivatives.
After closing Tuesday at 84 cents, shares of USEG came out strong in Wednesday action, climbing to an intraday high of $1.14. Shares have slid well off of that high, holding at 93 cents for a gain of 10.4% with about 90 minutes left in the trading session.
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