Upstream Oil & Gas Company Completes Transformative Permian Basin Assets Acquisition By Leveraging Cross-Functional Advisory Solutions

Upstream Oil & Gas Company Completes Transformative Permian Basin Assets Acquisition By Leveraging Cross-Functional Advisory Solutions

The Challenge

Ring Energy Inc. (“REI”) completed its acquisition (the “Transaction”) of the assets of privately held Stronghold Energy II Operating LLC and Stronghold Energy II Royalties LP (collectively, “Stronghold”). Stronghold’s operations are located primarily in Crane County, Texas, and focused on the development of approximately 37,000 net acres in the Permian Basin’s Central Basin Platform (“CBP”).

Due to the timing of the Transaction closing, the Company lacked the appropriate bandwidth to focus on the Transaction as the team was busy with their regular quarterly SEC filing. Additionally, the structure of the Transaction presented several technical accounting complexities, and due to the size of the Transaction, the Company needed to file pro forma financial statements under SEC rules. REI needed to partner with an experienced advisory firm to provide bandwidth and technical expertise to help on several fronts associated with the Transaction.

The Solution

Opportune’s Valuation, Complex Financial Reporting, and Transactional Due Diligence practice areas were engaged to perform the following functions in connection with REI’s acquisition of Stronghold’s assets and the associated hedge book.

Valuation - Opportune’s Valuation team assisted with purchase price allocation services and the estimation of the fair value of oil and gas properties by reserve category.

Complex Financial Reporting - Opportune’s Complex Financial Reporting team assisted with technical accounting and financial reporting advisory, including the following:

  • Provided technical analysis related to the issuance of preferred stock, including initial recognition, the appropriate classification, and subsequent accounting.
  • Provided technical analysis of the acquisition regarding business combination versus asset acquisition considerations.
  • Advised on SEC reporting requirements, including significance tests, and prepared pro forma financial statements and related footnotes.
  • Coordinated review of initial balance sheet recognition, cash flow preparation, and related disclosures.

Transactional Due Diligence – Opportune’s Transactional Due Diligence team assisted with the following:

  • Performed a detailed review of the preliminary settlement statement and drafted a response to Stronghold detailing areas where the purchase price should be reduced.
  • Opportune will assist Ring with the review of the final settlement statement and underlying support, once available, for final verification of the appropriate purchase price adjustment for the settlement period.

Business Impact

Leveraging its cross-functional teams of Valuation, Complex Financial Reporting, and Transactional Due Diligence, Opportune added value by helping the Company gain comfort over seller-provided information, as well as current systems and methodologies used to account for the fair value of the oil and gas properties, SEC reporting requirements, and final settlement statement review in support of the Transaction. With the help of Opportune, REI was able to file its pro forma financial statements on time and was also able to guide the Company through its auditor review process.

Related Insights

Looking for expertise in the energy industry? We’ve got you covered.

Find out why the new landmark legislation should provide a much-needed boost for the development of carbon capture.