2014

Synergy Resources Expands DJ Basin Presence with Acquisition of Assets from Orr Energy

PLATTEVILLE, Colo., Oct. 26, 2012 /PRNewswire/ -- Synergy Resources Corporation (NYSE Mkt: SYRG), a U.S. oil and gas exploration and production company focused on the Denver-Julesburg (D-J) Basin, has entered into a definitive agreement to purchase from Orr Energy 36 producing oil and gas wells in the Wattenberg Field of the Denver-Julesburg Basin. 

Under the terms of the agreement, Synergy will pay a total consideration of $42 million, comprised of $30 million in cash and $12 million in shares of Synergy's common stock.  The purchase price is subject to usual closing adjustments and conditions.  The transaction is expected to close at the end of November.

The combined 36 oil and gas wells are currently producing at an average rate of 360 BOE/D, with the oldest well in the field producing since 2006. All of the wells have been drilled vertically to the Codell, Niobrara and/or J-Sand formations.  Synergy will be the operator on 35 of the 36 wells.

The acquisition includes leases covering a total of approximately 3,933 gross (3,196 net) acres. 2,191 of these net acres are in the core of the Wattenberg field, adjoining or near existing Synergy leased or producing acreage.  Given the 20 acre spacing for vertical wells on this acreage, there is the potential to drill approximately 75 new vertical wells, and based on 80 acre spacing for horizontal wells, there is the potential to drill 55 Codell / Niobrara horizontal wells. 

The other 1,005 net acres are northeast of the Wattenberg field in Grover, Colorado.  Management plans to use existing seismic data acquired in the transaction to establish a drilling program for new vertical and horizontal wells on this acreage.  These leases are near other operators where existing production is 85% oil.

Synergy will have a 100% working interest (77% net revenue interest) in 29 of the producing wells to be acquired, with a smaller working /net revenue interest in the remaining seven wells. Synergy will have a 100% working interest (80% net revenue interest) in the majority of future wells drilled on the leased acreage. 

"This acquisition represents a valuable addition to our productive Wattenberg acreage," said William E. Scaff, vice president of Synergy Resources.  "The Orr assets were a prime target for us due to the strategic blocking nature to our acreage, and it allows us access to strategic pad sites in order to expand our vertical and horizontal drilling potential in this field. We are continuing to evaluate additional potential acquisitions that would suit our core strategy and the strengths of our management team."

Credit Agreement Amendment

Coinciding with the acquisition agreement, Synergy has amended the terms of its revolving line of credit and continues its long-term, expanding relationship with Community Banks of Colorado. The amended terms increase the maximum amount of borrowings available to Synergy from $20 million to $30 million, subject to certain collateral requirements.  The company anticipates using the expanded credit line for acquisitions and to fund a portion of its 2013 CAPEX program.  The maximum interest rate on the line of credit is LIBOR plus 3.0%. The company currently has minimal long-term debt.

The company will release its fiscal 2012 year-end results on or about November 7, 2012, where it will continue to discuss the merits of this acquisition, 2013 CAPEX spending and year-end financial results.

About Synergy Resources Corporation

Synergy Resources Corporation is a domestic oil and natural gas exploration and production company. Synergy's core area of operations is in the Denver-Julesburg Basin, which encompasses Colorado, Wyoming, Kansas, and Nebraska. The Wattenberg field in the D-J Basin ranks as one of the most productive fields in the U.S. The company's corporate offices are located in Platteville, Colorado. More company news and information about Synergy Resources is available at www.SYRGinfo.com.

For more information about Synergy Resources Corp., contact Justin Vaicek at Liolios Group at 949-574-3860 or email SYRG@liolios.com.

Important Cautions Regarding Forward Looking Statements

This press release may contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. The use of words such as "believes," "expects," "anticipates," "intends," "plans," "estimates," "should," "likely" or similar expressions, indicates a forward-looking statement. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of management, and information currently available to management. The actual results could differ materially from a conclusion, forecast or projection in any forward-looking statement. Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information. The identification in this press release of factors that may affect the company's future performance and the accuracy of forward-looking statements is meant to be illustrative and by no means exhaustive. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. Factors that could cause the company's actual results to differ materially from those expressed or implied by forward-looking statements include, but are not limited to: the success of the company's exploration and development efforts; the price of oil and gas; the worldwide economic situation; changes in interest rates or inflation; the ability of the Company to transport gas; willingness and ability of third parties to honor their contractual commitments; the company's ability to raise additional capital, as it may be affected by current conditions in the stock market and competition in the oil and gas industry for risk capital; the company's capital costs, which may be affected by delays or cost overruns; costs of production; environmental and other regulations, as the same presently exist or may later be amended; the company's ability to identify, finance and integrate any future acquisitions; and the volatility of the company's stock price.

SOURCE Synergy Resources Corporation



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