On Mar 10, 2014, independent energy firm PEDEVCO Corp. (PED) declared that it has purchased roughly 28,000 net acres of land along with 40 wells in the Colorado-based DJ Basin. PEDEVCO acquired the properties from an U.S-based energy firm for a cash consideration of $28.0 million.
For financing the asset purchase and to initiate drilling operations in the newly acquired properties, PEDEVCO has inked a 3-year term debt agreement with RJ Resources. PEDEVCO added that as a portion of the deal, RJ Resources is expected to have a 50% working interest in the acquired assets.
Under the 3-year debt deal, PEDEVCO is eligible to take $50.0 million of debt from RJ Resources. Of which, PEDEVCO has already taken $34.5 million for purchasing the asset, while the remaining will be drawn for drilling operations in the acquired properties.
PEDEVCO expects to considerably improve its daily output in the DJ Basin through the new asset purchase. This will also benefit shareholders in the form of increased cash flow.
Danville, CA-based PEDEVCO is involved in the acquisition and development of U.S and Asia based shale oil and gas properties. The primary assets of PEDEVCO also consist of Niobrara acreage in the DJ Basin.
PEDEVCO currently retains a Zacks Rank #2 (Buy), implying that it is expected to outperform the broader U.S. equity market over the next 1 to 3 months.
One can also consider better-ranked players in the energy sector like Range Resources Corp. (RRC), Helmerich & Payne Inc. (HP) and Warren Resources Inc. (WRES). All the players sport a Zacks Rank #1 (Strong Buy).