In this bullish oil market, few companies are as well versed in the conservative approach to growth like Viking Energy Group, Inc. (VKIN). Over the last two months, the company has acquired 16 domestic oil leases for low closing costs with immediate appreciation potential, and now the leadership team at Viking has done it again.
The company just announced it signed an agreement to acquire a privately-owned company with oil and gas assets valued, based on NYMEX commodity pricing, at approximately $16.3 million. Viking referenced this negotiation in earlier in the summer, and the two sides have finally signed on the dotted line. The company will receive, provided the transaction closes, 100% ownership of the assets for a final sale price of $3 million along with 2 million in common shares and 1.5% over-riding royalty interest for the existing oil and gas leases. The expected closing date for the deal is Dec. 22, 2017.
For Viking, this is a game-changing move that adds serious market capitalization to an already growing E&P play in the process of grooming a series of undervalued assets. In addition, the company received an invaluable advantage by bringing aboard the team from the target company boasting decades of industry knowledge. Below is a detailed breakdown from the newly acquired company:
- Working interest in multiple oil and gas fields across States of Texas, Louisiana and Mississippi.
- Current production is ~ net 350 BOEPD (75% oil)
- Leases to 11,629 gross acres / 9,360 net acres
- Targeting conventional oil and gas utilizing 3D seismic data and AVO analysis of the final data
- Multiple locations have been high-graded and can be drilled and completed
- Estimated value of total proved producing reserves (PDP) on a PV9 basis, with NYMEX commodity pricing, as of October 2017, was approx. $16.3 million.
- Management team with deep experience in Petroleum Engineering and Geophysics, in addition to a Certified Professional Landman and other personnel. Individuals in each key position have over 40 years’ experience in the energy sector.
Upon the closing of this deal, Viking, led by the veteran CEO James Doris, will have closed four deals in less than 120 days bringing the maturing company a multitude of new acreage. As mentioned above, the previous deals in the months of September and October alone brought in 16 new leases, here is a summary of those acquisitions:
- October 5th, 2017 – The company acquired an 80% interest in six new oil and gas leases spread across Kansas counties: Riley, Geary and Wabaunsee. The leases produce oil from various zones, including the Conglomerate (at depths of 1,650 to 1,800 feet), Viola and Simpson Sandstone (at depths of 2,917 to 3,063 feet) and offer the potential for several future drilling locations. Historical records for these leases (e.g. drilling logs for one well showed initial production at 3,000 bopd; and another well produced for an extended period at 100 bopd), suggest new drilling on these properties could significantly enhance existing production.
- October 3rd, 2017 – the company acquired a 100% interest in six additional leases in Miami and Franklin counties.
- September 12th, 2017 – , Viking added 980 acres of oil and gas leases (4 in number) in Anderson County, Kansas. Those leases produce oil from the Cherokee Formation – an important group of sandstones, limestones, shales and coal bed outcroppings in Eastern Kansas – at 850 feet, with the prospect for more drilling in the future.
These recent moves underscore Viking’s disciplined philosophy, their aggressive portfolio build-out and their ability to stay profitable in any season. Doris and the experts standing behind him are not out drilling wildcat wells, but building a sizeable portfolio of assets with proven production, measurable reserves and developmental opportunities. In short, Viking is all about downside protection and upside potential.
“The sector is cyclical and over the last two years—with oil prices falling to below $30 a barrel at one point early last year from over a $100 a barrel—it was a huge adjustment for existing players,” Doris explained in an interview with Equities in May. “But for us, as a company in its infancy, and with low overhead and low infrastructure costs, it was a great opportunity to acquire assets at today’s prices. Although we’re bullish on the commodity price and we expect it to increase over time, when we’re analyzing our acquisition opportunities we’re basing it on today’s price and making sure that it’s profitable at the current price per barrel. We also have programs in place to mitigate risk on the downside if there is another downturn for oil prices.”
Since Viking has been doing this for some time – long before the oil and gas sector started to rebound – the company has been paying bargain prices for oil patches across the U.S. and will now start to make money at current prices. Of course, this is excellent news for Viking because the price of crude has risen for four straight months and shows little sign of a plateau.
The company’s recent milestones are proof that Viking’s business plan is now gaining momentum and this last acquisition – an exciting and seminal moment for the company – could start to draw the attention of more and more institutional investors.
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