Adding to its existing natural gas plays in southwest Wyoming's Green River Basin and Pennsylvania's Appalachian Basin, Ultra Petroleum (NYSE: UPL ) announced today it has signed a definitive agreement to purchase a 100% interest in oil-producing land in the Uinta Basin located in northeast Utah. The total value of the deal is $650 million.
Ultra's Green River basin consists of two natural gas fields, Pinedale and Jonah. Its Appalachian Basin properties are focused on the Marcellus shale, an area Ultra has been horizontally drilling in since 2009.
According to Ultra's statement, the new acquisition will become profitable and generate "exceptional returns" even below the $75-a-barrel range. Currently, the Uinta basin is producing 4,000 barrels of oil daily from 38 working wells, with reserves estimated at more than 90 million barrels of oil (MMBO), Ultra said.
Commenting on the financial impact of the Uinta acquisition, Ultra chairman, president and CEO Michael Watford said, "The asset is cash flow positive starting in year one and completely pays for itself in five years followed by decades of free cash flow."
The deal is subject to standard closing conditions, and is expected to close in December. The $650 million acquisition will be financed through the issuance of debt.