U.S. Energy Development Corp. is participating in a $77 million development of its Echo project acreage. The project will co-invest with three other companies and includes an interest in eight oil wells for a net investment of $5.5 million. Current development is expected to create additional cash flow for investors, while potentially increasing the future divestment value on the more than 2,700 net acres owned in the Echo project.
In 2018, U.S. Energy acquired the Echo project on behalf of two of the company’s acquisition funds, the Strategic Energy Income Funds IV and V LP. Following the initial sale of a small portion of assets to Devon Energy, which netted a 61 percent distribution to investors in 2018. the company has moved into the development phase, whereby it is participating in production from new wells. Initial revenue from the eight wells is targeted for July, with distributions to investors to follow in the third quarter 2019.
Oil development in New Mexico has been red-hot as of late, with light, tight oil production increasing by about 70 percent year over year, from 419,000 barrels per day in November 2017 to 703,000 barrels per day in November 2018, according to Rystad Energy, an independent energy research and business intelligence company. In 2018, New Mexico had the fastest growth rate among all major states with significant shale activity.
“Our confidence in the Permian Basin in New Mexico continues be supported by recent production growth and new investment,” commented Matthew Iak, executive vice president and director for U.S. Energy. “The Echo project is one example of how U.S. Energy can identify and acquire a project in a strategically located area, tap into existing relationships to create immediate divestments and distributions, then deploy our own operations team to drill and/or participate in projects which create additional value for investors.”
The company is currently raising investor capital for deployment into several potential projects, which could be included in the Strategic Fund V. The Strategic Energy Income Fund V is the fifth issue in the series and is targeted to close by July 1, 2019.
U.S. Energy’s acquisition funds are tax-efficient, acquisition-focused, direct investments that provide investors with both income and growth potential from the underlying assets.