In an effort to further its emphasis on higher-margin crude oil and natural gas production, QEP Resources (NYSE: QEP ) announced today it has signed a definitive agreement to acquire oil and natural gas properties located in the West Texas midland region of the Permian Basin for an estimated $950 million. The deal to acquire the Permian Basin property is with privately held oil and natural gas producer EnerVest of Houston.
QEP said it intends to fund the transaction using its existing revolving credit facility and cash. As of Sept. 30, 2013, QEP had $123 million in cash and equivalents on its balance sheet. QEP also announced it will "sell various non-core E&P [exploration and production] assets located in the Midcontinent during the first half of 2014" to strengthen its cash position following the closing of the Permian Basin transaction.
The Permian Basin acquisition includes more than 26,500 net acres and 264 existing wells producing an estimated 6,700 barrels of oil equivalent per day, with proven reserves of as much as 47 million barrels of oil equivalent. The total recoverable assets, according to QEP, could reach as high as 300 million barrels of oil equivalent..
The Permian Basin in West Texas and southeast New Mexico has already produced more than 29 billion barrels of oil and 75 trillion cubic feet of natural gas and, according to industry experts, the remaining reserves total more than all the production in the area over the last 90 years. From January to September of this year, the Permian Basin has produced an average of nearly 922,000 barrels of oil equivalent per day.
The deal is expected to close on or before Jan. 31, QEP said.