Looking to capitalize on higher rates of return from its Permian and Eagle Ford positions, Pioneer Natural Resources Co. said Thursday that it is looking to sell the 155,000 gross acres in the Barnett Shale that it has accumulated since entering the play in 2007.
According to the Dallas, TX-based oil and gas exploration and production company, two-thirds of the acres are located in the liquids-rich Barnett Shale Combo play. The remaining one-third are located in the dry gas area. Production has grown to roughly 7,000 barrels oil equivalent per day, of which approximately 55% is liquids (oil and natural gas liquids) and 45% is dry gas.
Proceeds from the sale could reach $670 million at $50,000/boe and $4,000/acre for 80,000 combo acres, noted analysts at Global Hunter Securities (GHS) following the announcement.
Gearing up for Permian, Eagle Ford
Scott Sheffield, chairman and CEO, stated, “The sale of our Barnett Shale properties will allow us to strategically reallocate capital to our higher-return, core assets in the Spraberry vertical play, the horizontal Wolfcamp Shale play and the Eagle Ford Shale. We plan to utilize the net proceeds from the divestiture to reduce indebtedness under Pioneer's credit facility.”
Pioneer's September investor presentation shows the company drilled 34 Eagle Ford wells in Q2 2012 and 37 wells were placed on production. Twelve rigs are currently running and gross well cost are estimated at $7 million to $8 million per well. The company's 2012 drilling program in the play (estimated at 125 wells) continues to focus on liquids-rich drilling with only 10% of the wells designated to hold strategic dry gas acreage.
In March of this year, the company paid $297 million for Carmeuse Industrial Sands to secure supply for fracture stimulation of its Texas assets. And while the Eagle Ford program continues to grow, the real ramp up may be in the company's Permian holdings.
“To us this shows how confident PXD is in its massive 900K gross acre position in the Permian’s Midland Basin. We think that reallocating capital to the best plays and shedding non-core assets destined to take the backseat in terms of development is almost always a savvy strategic move,” noted GHS analyst Mike Kelly.
The company is targeting completion of the divestiture process during the first quarter of 2013. RBC Richardson Barr has been engaged to market the assets for the company.