Energen sells San Juan Basin assets, focuses solely on Permian Basin

In core Midland Basin, Energen has 68,500 net acres with 2,546 net identified locations in 7 horizontal formations

 

BIRMINGHAM – Energen Corporation says it has closed purchase and sale agreements (PSAs) for its non-core Delaware Basin and San Juan Basin assets, and in the future will be drilling only in the Permian Basin.

Permian-Basin-geologyIncluding all sales transactions with multiple, undisclosed buyers, the total gross proceeds are $551.7 million. The company expects to incur minimal taxes in association with these transactions.

Net production associated with properties being sold averaged 9.0 mboepd in April, of which only 34 per cent was oil; majority being in the San Juan Basin.

In the Delaware Basin, assets for which sales are closed or pending reflect unproved leasehold of approximately 55,000 net acres previously designated as Tier 1 or Tier 2.

“We are very pleased with the success of our non-core asset sales,” said James McManus, Energen’s chairman and chief executive officer.

At Dec. 31 2015, proved reserves associated with all non-core asset sales totaled approximately 55 million BOE.

“The proceeds have exceeded our expectations and, as a result, our balance sheet is even stronger. This position of financial strength allows us a great deal of flexibility to pursue additional capital investment opportunities in the Permian Basin in 2016 and 2017, including increased drilling and development and acquisitions,” said McManus.

McManus says Energen is increasing its capital investment in 2016 to approximately $450 million to further build up its inventory of drilled but uncompleted wells at year end.

“Up to $130 million will now target the Delaware Basin, where we plan to drill 17-19 net DUCs in the second half of 2016. In total, we now expect to end the year with approximately 54-58 net DUCs in the Permian Basin,” he said.

With the sale of the remainder of its San Juan Basin assets, Energen has completed its transition to a pure Permian Basin operator, says McManus.

Energen’s focus is on drilling and developing its high-quality acreage positions in the Midland and Delaware basins, where it estimates a remaining net resource potential of 2.0 billion BOE.

In the core Midland Basin, the company has approximately 68,500 net acres with 2,546 net identified locations in seven horizontal formations. After all the transactions have closed, Energen will have approximately 42,200 net acres in the Delaware Basin in Texas and New Mexico with 954 net identified locations in four Wolfcamp shale formations.

The company’s primary focus in the Delaware Basin will be on bringing forward the value on approximately 31,200 net acres in Loving and parts of Reeves and Ward counties.

On this core acreage position, the company has identified 675 net locations, including 148 net locations with at least 10,000 foot laterals and another 217 net locations with average lateral lengths of 7,500 feet.

The following tables update Energen’s production guidance midpoints for the second quarter of 2016 and for calendar year 2016 to exclude all sales-associated production.

Production Guidance by Basin (excluding production from non-core asset sales) (mboepd)

Area 2Q16e Midpoint 2016e Midpoint 2015
Midland Basin 35.2 34.2 31.6
Horizontal 26.6 25.5 20.3
Vertical 8.6 8.7 11.3
Delaware Basin 9.4 9.8 12.1
Central Basin Platform/Other 9.3 9.1 9.9
Total 53.9 53.1 53.6
Total production associated with non-core asset sales excluded from the above guidance:
Delaware Basin 3.2 3.0 3.1
San Juan Basin 5.5 5.4 5.0

NOTE: Totals may not sum due to rounding

Production Guidance by Commodity (excluding production from non-core asset sales) (mboepd)

Commodity 2Q16e Midpoint 2016e Midpoint 2015
Oil 34.8 34.3 35.6
NGL 8.9 8.7 8.6
Gas 10.2 10.1 9.3
Total Production 53.9 53.1 53.6
Total production associated with non-core asset sales excluded from the above guidance:
Oil 2.8 2.7 2.8
NGL 2.5 2.4 2.1
Gas 3.4 3.3 3.2

NOTE: Totals may not sum due to rounding

Posted in: Energy Financial

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