QEP sells off county assets

By Joy Ufford
Posted 7/28/17

QEP Resources announced two agreements on Monday worth a total of $777.5-million that will divest its Pinedale Anticline natural-gas assets to two different buyers.

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QEP sells off county assets

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PINEDALE – QEP Resources announced two agreements on Monday worth a total of $777.5-million that will divest its Pinedale Anticline natural-gas assets to two different buyers.

The largest deal – for $740 million – transfers all of its subsidiary QEP Energy assets in Sublette County to Pinedale Energy Partners, LLC, named as an affiliate of Oak Ridge Natural Resources LLC in the announcement. QEP held 14,400 net acres in the Anticline.

QEP CEO Chuck Stanley noted in Monday’s announcement, “Our Wyoming assets have been significant contributors to the company for many years and were critical to our early success. As we continue to evolve as a company, these transactions are a necessary next step in simplifying our asset portfolio and delivering significant financial proceeds that will further strengthen our balance sheet and help fund future development projects and acquisition opportunities.”

In April, Stanley had told shareholders that QEP wanted to “streamline” its portfolio and anticipated selling its Pinedale properties to “monetize” and turn its focus to its projects in the Williston and Permian basins.

“We view Pinedale as a great asset; it has been the foundation of the company for a number of years and a platform for growth for us, but at this juncture, we’re running out of inventory to continue to grow production,” Stanley said at the company’s April meeting. “That is one of the primary drivers, along with market interest in PDP (proved developed producing assets).”

New deal

On Wednesday, Stanley announced QEP Energy had entered into a “definitive agreement to acquire crude oil and natural gas properties in the Permian Basin for an aggregate purchase price of $732 million,” subject to customary adjustments.

The purchase adds more than 730 potential horizontal drilling sites in Martin County, Texas, to its existing Midland Basin acreage, according to its release.

“Earlier this week, we announced agreements to sell all of our Pinedale assets and other southwest Wyoming gas assets for a total of $777.5 million, which combined with (Wednesday’s) announced agreement to acquire approximately 13,800 additional net acres in the core of the northern Midland Basin, continues our pivot towards a more oil-focused portfolio,” said Stanley. “We expect to fund the Permian Basin acquisition with proceeds from our Pinedale asset sale and with cash on hand. The Pinedale asset sale and the Permian Basin acquisition will be structured as a like-kind-exchange, and we expect to be able to defer income taxes incurred on the gain on sale.”

In a separate transaction, QEP also announced Monday “the sale of certain non-core natural gas assets in southern Wyoming to an undisclosed buyer on June 30, 2017,” for $37.5 million.

“The divestiture includes an estimated 15.2 Bcfe (billions of cubic feet equivalent) of proved reserves as of Dec. 31, 2016, and net production in the first quarter of 2017 was approximately 4 MMcfed, of which approximately 2 percent was liquids.”

New owner

New owner Oak Ridge Natural Resources is an independent oil and natural gas oil exploration and production company headquartered in Tulsa, Okla., according to its website.

“The acquired assets generated 234 MMcfed (million cubic feet equivalent per day) of net production from over 1,100 producing wells during the first quarter of 2017 and include an extensive inventory of low-risk vertical drilling locations,” according to J. Chris Jacobsen, Oak Ridge CEO, in a statement Monday.

“The assets also include significant acreage prospective in the emerging horizontal Lance and deep Hilliard plays,” he continued. “… The Pinedale Field is an area that we believe offers considerable upside potential through continued production optimization and exploitation drilling. We are looking forward to working in a collaborative effort with the Pinedale field personnel, the exploitation team, and our equity sponsors to create value in the years to come.”

This is Oak Ridge’s first acquisition since its formation in 2015, with its focus to acquire and develop “large, long-life producing oil and gas assets in North America.”

A further look at Pinedale Energy Partners (PEP) LLC has Bloomberg.com describing it as a “small new electric service company” based in Houston. PEP’s affiliate, Pinedale Energy LLC, is a subsidiary of Exelon Generation Company LLC in Delaware, which in turn is a subsidiary of Exelon Corp. located in Kennett Square, Pa.

Exelon Corp. generates and markets electricity across the U.S. and it holds interests in nuclear, wind, hydro, solar and waste-coal electricity generation, according to its website.

On June 6, Pinedale Energy “received notification from its operating partner for four wells (0.85 net) of its drilling program at its Pinedale field leases in southwest Wyoming,” according to Bloomberg.com. “The authorizations for expenditure (AFEs) for these wells averages USD $2.8 million gross, or approximately USD $595,000 per well to Pinedale. The company has notified its operating partner that it has elected to participate in the four wells.”

Further information on Pinedale Energy, its operating partner and the four wells was not available at press time.