QEP Resources To Exit Haynesville, Boost Permian Presence
Zacks Investment Research | Nov 19, 2018 08:22PM ET
In a bid to sharpen its focus on the prolific Permian play, QEP Resources, Inc. (NYSE:QEP) recently inked a deal to jettison its Haynesville shale holdings to Dallas-based private equity backed firm, Aethon Energy Management LLC.
Deal Highlights
Per the deal, Denver-based QEP Resources will divest its oil and gas producing properties, along with underdeveloped acreage and other midstream infrastructure in the Haynesville/Cotton Valley. The divested assets comprise acreage of around 49,700 net acres along with 137 gross operated wells. The region incorporates proved reserves of 159.8 million barrels of oil equivalent as of Dec 31, 2017.
The transaction, valued at $735 million, is set for closure in January 2019, subject to satisfactory closing conditions and other regulatory approvals.
Notably, QEP Resources' net production from these assets in the last reported quarter was 296.9 million cubic feet of gas equivalent per day. With the deal, the company bids adieu to Haynesville holdings and revs up its efforts to concentrate on the Permian shale play. The proceeds from the deal will be utilized to ramp up the development of its core Permian properties. In addition, the company intends to utilize the funds for debt repayments and share buyback programs to increase its shareholders’ value.
Slew of Divestments to Bolster Permian Focus
The deal is in line with the company’s strategy to actually become a Permian pure play. Of late, QEP Resources has been entering into various strategic deals to streamline its portfolio and sharpen focus on the more profitable Permian Basin.
Last July, it offloaded its natural gas assets in southern Wyoming, including Pinedale properties, in a $777.5-million deal. This July, it further inked a $155-million deal to sell its oil and gas assets in the Uinta Basin. Just around two weeks back, the company announced the divestment of its Williston Basin properties to Vantage Energy for $1,725 million in a cash-stock deal, which is expected to close by early second-quarter 2019. And of now, with its latest agreement to vend Haynesville assets, QEP Resources is set to become a Permian pure play.
In 2016, it bought around 9,400 acres in the Permian for $600 million. Last July, it inked another $732-million deal to acquire around 13,800 acres in the Permian Basin. In fact, QEP Resources has allocated about 65% of its 2018 capital budget for this lucrative play, as it aims to transform itself into a Permian pure play. Importantly, the company’s daily equivalent Permian production in the third quarter amounted to 4,792.5 thousand barrels, up 104% from the year-ago period.
While QEP Resources actively works on increasing its oil development drilling inventory in Permian through acquisitions, swaps and organic growth opportunities, the current pipeline pinch in the shale play remains a cause of near-term concern for this Zacks Rank #3 (Hold) company. You can see Original post
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