ZaZa Energy Corp. (Nasdaq: ZAZA) has closed the previously announced purchase and sale agreement with an affiliate of Quantum Energy Partners, which includes an East Texas Development Agreement comprising Walker, Grimes, Madison, Trinity, and Houston counties.

Pursuant to the terms of the Quantum Agreements, ZaZa will receive total consideration of approximately $17 million, which includes $11 million in cash that was paid to ZaZa on September 18. In exchange, ZaZa has assigned to Quantum 6,000 net acres in undeveloped leases within ZaZa’s “Southern Development Area” in East Texas. Quantum’s interest is an undivided one, spread evenly across all of the leases in the 144,000-acre Southern Development Area.

Following the closing of these Agreements, ZaZa’s East Texas acreage holdings comprise two separate development areas, each with different operators and ownership structures:

  • Southern Development Area (Madison, Walker, and Grimes counties). The Southern Development Area comprises approximately 144,000 net acres and is operated by EOG Resources Inc. ZaZa holds a 20.78% working interest, or approximately 30,000 net acres and Quantum holds a 4.22% working interest, or 6,000 net acres in this area. During the next two years, ZaZa has the option to participate for both its and Quantum’s working interest—for a total of a 25% working interest to ZaZa—in the next 15 wells drilled within the Southern Development Area. ZaZa also retained its full 25% working interest in all wells spudded prior to the closing of the Quantum Agreements.
  • Northern Development Areas (Houston, Trinity, and Leon counties). The Northern Development Areas comprise approximately 10,000 net acres and is operated and owned 100% by ZaZa. This acreage was not subject to the Quantum Agreements. Through the remainder of 2014 ZaZa will be preparing the acreage block in Houston and Trinity counties to be drill ready from a unit formation perspective, and the Company’s leasing is now focused on contiguous acreage additions.

The proceeds from the transaction principally will be used to fund drilling CAPEX and lease acquisitions, with $1.1 million of the proceeds required to be used for senior secured debt reduction under the terms of that debt. The company’s senior secured debt has now been reduced to $13.9 million (from its initial level of $100 million).

ZaZa and QEP are based in Houston.