Exploration

The Importance of Legacy Acreage

Alta Mesa Holdings, LP STACK Assets Key to Continued Success

Alta Mesa Holdings, LP is a privately held company engaged in onshore oil and gas acquisition, exploitation and production with a seasoned management team. The company’s core producing assets are located in the Oklahoma Sooner Trend and in South Louisiana. Production in the second quarter of 2016 in the Company’s Sooner Trend STACK play averaged approximately 12,300 BOE per day, up approximately 45% compared to 8,500 BOE per day in the second quarter of 2015.

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Back in 2005, Alta Mesa transferred its interests into Oklahoma Energy Acquisitions LP, (OEA) whose general partner is Alta Mesa GP LLC. When looking at the regulatory and production data, it is OEA that you need to look for.

At last months DUG Mid-Continent Conference & Exhibition held in Oklahoma City, Hal Chappelle, president and CEO of Alta Mesa Holdings LP, called the STACK a top North American play. The play began in Canadian, Kingfisher, and Blaine Counties but has recently been expanding farther North and West into Dewey and Major Counties.

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Alta Mesa’s acreage position is concentrated primarily in eastern Kingfisher County. To date, the company has drilled 116 horizontal Stack wells, mainly in the Osage Lime. It is also testing the Meramec and Oswego with horizontal wells, and it plans a Manning horizontal test in the fourth quarter.

In January of this year, the company announced financing for the drilling of joint wells on the Company’s acreage in the core of the STACK play in Kingfisher County, Oklahoma. The joint drilling agreement (JDA) was made with private-equity group Bayou City Energy Partners (BCE) for a 60-well defined package consisting of three 20-well tranches. So far, they have drilled 33 of the 60 proposed wells.

As of June 30, 2016, the Company had four drilling rigs operating in this area with plans to potentially add one additional rig during 2016.

Under the JDA, BCE committed to fund 100% of the Company’s working interest share up to the maximum of an average $3.2 million in drilling and completion costs per well for any tranche. The Company is responsible for any drilling and completion costs exceeding the limit. The JV Partner initially receives an 80% working interest in the wellbore. There’s a sliding scale for the JV working interest, which gets reduced as internal rates of return (IRRs) increase with specific wells being pre-agreed on for each tranche.

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The deal came along at a key time for the company and has allowed Alta Mesa to maintain and develop its leasehold. The Alta Mesa assets in Oklahoma have been owned by Alta Mesa for over 20 years and are located in large mature oil fields. The fields were originally developed by Texaco, Exxon, and Conoco. The company has over 80,000 net acres that are mostly held by production contained in the Lincoln North Unit, Hennessey Unit, Lincoln Southeast Unit, and Dover Unit, all located in Kingfisher County.

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In May of 2015, Oklahoma Energy Acquisitions LP acquired from Gastar Exploration, Inc., certain noncore assets in Oklahoma for about $46.2 million. The assets included 38 gross (16.7 net) wells on about 29,300 gross (19,000 net) acres in Kingfisher County. The wells produced an average of about 170 net barrels of oil equivalent per day (boe/d) per day, 57% natural gas, during the first quarter of 2015. This significantly added to the legacy acreage acquired from Alta Mesa Holdings, LP.

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