Dec. 9 (Bloomberg) -- QEP Resources Inc., the energy producer targeted by activist investor Jana Partners LLC, agreed to buy Permian Basin assets for about $950 million to increase production of high-margin crude oil and natural gas liquids.
The acquisition from closely held EnerVest Ltd. includes 26,519 net acres in the Midland sub-basin, mainly in Martin and Andrews counties in West Texas, Denver-based QEP said today in a statement. The assets currently produce 6,700 barrels of oil equivalent a day, of which 68 percent is crude.
QEP, the third-worst performer this year among peer U.S. exploration and production companies, said the purchase adds proved reserves of about 47 million barrels of oil equivalent and 300 million barrels of potentially recoverable resources. It comes after the company bowed to pressure from Jana earlier this month to pursue the separation of its gas gathering and processing business.
The purchase equates to about $20,000 an acre, Brian Velie, a New Orleans-based analyst for Capital One Southcoast Inc., said in a phone interview. “That’s on the high side, but some of the neighboring wells were very, very strong in the early going. If you get core acreage, usually the acquisition price is offset by the well economics.”
Velie rates the shares a buy and owns none. QEP fell 1.5 percent to $30.96 at the close in New York. The shares have gained 2.3 percent this year, the third-worst performance among the 18 companies on the Standard & Poor’s 500 Oil & Gas Exploration & Production Index.
QEP will pay for the purchase with cash on hand and from its revolving credit facility. It intends to sell unidentified assets in the mid-continent region in the first half of 2014, according to the statement. Spending will be focused on the Permian and North Dakota, as well as wells in the Pinedale Anticline in the Rocky Mountains and the Uinta Basin in Utah.
Jana, which holds a 6.45 percent stake in QEP, according to data compiled by Bloomberg, declined to comment on the transaction.
The Midland Basin may have 16 billion to 40 billion barrels of oil recoverable from horizontal wells depending on how may layers prove productive, according to a report last month by Investment Technology Group Inc. Production from the Permian Basin reached 312 million barrels last year, Railroad Commission of Texas data show.
EnerVest, based in Houston, said in a separate statement that the transaction is expected to close by Jan. 31. It bought most of the properties in September 2012.
“This divestiture illustrates our core strategy of creating value for our institutional investors by acquiring attractive assets, increasing their value through drilling and development and then selling them to leading upstream firms like QEP,” John B. Walker, chief executive officer of EnerVest, said in the statement.
Wells Fargo & Co. provided financial advice to EnerVest and Vinson & Elkins LLP served as the company’s legal counsel.
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