Panhandle Oil and Gas plans to lease Permian Basin acreage for $2 million cash and royalties

panha

Michael Coffman is CEO of Panhandle Oil and Gas in Oklahoma City. [Photo by Paul Hellstern, The Oklahoman Archives]

The Oklahoman – Panhandle Oil and Gas Inc. said Monday it has agreed to lease its acreage in the West Texas Permian Basin for $2 million in cash, plus royalties.

The Oklahoma City-based oil and natural gas company said it leased 4,052 acres of undeveloped oil and natural gas properties. Panhandle did not disclose the name of the lessee company, which agreed to pay $2 million in cash up front.

Panhandle also will received a 25 percent non-cost bearing royalty from the production and has an option to buy back a stake in the wells when they are drilled.

The terms are similar to a deal Panhandle reached in June for another 2,440 acres in the area. Panhandle received $1.2 million in cash for that deal in addition to the 25 percent royalty and ability to buy a participating stake.

“We were able to do that because both are pretty good-sized blocks,” Panhandle CEO Michael Coffman said. “Both entities leasing in the area felt like it was in their best interest to negotiate and come to a mutually win-win situation on the lease agreement.”

Panhandle does not operate any wells, but has royalty and non-operating interests throughout the country.

Deals called ‘typical’

The most recent deals are typical arrangements for Panhandle. They were completed even as oil prices tumbled to seven-year lows.

“The areas we traditionally have had activities in have slowed down very dramatically,” Coffman said. “Having these two deals at this point in time is very meaningful. “If both projects work economically, there could be hundreds of wells drilled in each project area. They could be very significant over the next few years for Panhandle.”

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