SAN ANTONIO - Abraxas Petroleum Corp. (NASDAQ: AXAS) has signed a joint venture agreement with Denver-based exploration and production start-up company Blue Stone Oil & Gas LLC to develop the Eagle Ford Shale play in South Texas.
San Antonio-based Abraxas will contribute 8,333 net acres located in all three hydrocarbon windows in the Eagle Ford Shale play to the joint venture, Blue Eagle Energy LLC, in return for a $25 million equity interest in the JV.
Blue Stone will initially contribute $25 million in cash to the JV for a $25 million equity interest in the JV. In addition, Blue Stone has committed an additional $50 million in cash to the JV, which combined with the initial $25 million, will be used to acquire additional acreage and 3-D seismic data, and to drill and complete wells targeting the Eagle Ford Shale formation.
Upon full funding, Abraxas will own a 25% equity interest in the JV and Blue Stone will own a 75% equity interest in the JV.
The JV's subject area will encompass 12 counties across the Eagle Ford Shale play for expected future acreage acquisitions. Abraxas will operate the wells in the JV and Blue Stone will manage the day-to-day business affairs of the JV.
Capital infusion
In a company press release, Abraxas president and CEO Bob Watson commented that the joint venture "will greatly accelerate our activity in the Eagle Ford Shale play, well above what we could have accomplished on our own." He noted the capital infusion will "allow the JV to drill and complete approximately 10 wells."
After the announcement, in a note to clients, Wunderlich Securities wrote that the transaction "should allow Abraxas to increase the activity of the play nicely over the next 12-18 months. We believe the deal not only allows Abraxas to ramp operations in the Eagle Ford, but also allows Abraxas to focus its capital on other projects (specifically its operated Bakken play)."
Rivington Capital Advisors LLC, and its affiliate, Rivington Securities LLC, acted as exclusive financial advisor to Blue Stone.