I specify on a go-forward basis because we retain the producing zone in our existing wells on the acreage position. These wells are outlined in red on the map. Once BHP exercises its option to purchase, the two companies will form areas of mutual interest around the larger acreage blocks and acquire future acreage in the Delaware sub-basis on a 50/50 basis.
The potential AMIs are outlined in purple and blue on the map. BHP would operate the AMIs outlined in purple, they represent about 75% of the net acres, we would operate the AMIs outlined in blue are approximately 25% of the net acres. We obviously don’t know at this point what the drilling activity level may be in 2012 and ‘13 from the potential joint exploration agreement. If BHP exercises its option to purchase, current year drilling could result and would most likely increase our planned capital investment.
It also would have implications on the capital and drilling plans we’ve already outlined for 2013. Regardless, we plan to continue implementing our existing 2012 capital drilling and development plans for the Delaware basin, East of the River.
So, what does this agreement mean to Energen? We stand to gain an excellent industry partner with whom to explore multiple trends across the substantial acreage position. We’re positioning ourselves to accelerate the exploration and possible development of multiple trends West of the Pecos River beyond what we could have done by ourselves.We get a crew working up to two horizontal Wolf Camp completions. We’re positioned to recoup our investment in acreage acquisition West of the River, and essentially own 50% at zero cost, provides additional cash that can be invested in acquisitions and additional capital requirements generated by the joint exploration, if they exercise their option. Read the rest of this transcript for free on seekingalpha.com