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ConocoPhillips selling Barnett assets to Lime Rock

 

 

ConocoPhillips has divested its Barnett shale holdings. The company announced on 2 August that it will sell about 114,000 acres in the North Texas play to investment firm Lime Rock Resources for approximately $230 million.

The Fort Worth Basin wells averaged about 9,000 BOE/day for ConocoPhillips during Q1 and Q2 2018. Roughly 55% of the output was NG, the remainder was NGL.

The acquisition of the wells will provide Lime Rock with a “robust cash flow and substantial horizontal development opportunities,” Charlie Addock, Lime Rock’s co-CEO, noted in a statement. For ConocoPhillips, the sale of its Barnet position is part of a long-term strategy to reduce the company’s debt exposure.

In 2016, ConocoPhillips started wiping the red out of its ledger. Initially, the company hoped to get debt below $20 billion, but after divesting itself of $16 billion in noncore assets over the course of 2017, ConocoPhillips was able to move the goal post downfield to less than $15 billion in total debt.

As part of the company’s ongoing debt reduction strategy, ConocoPhillips has parted ways with an estimated $250 million in assets this year. The company has sold off certain properties in the Permian Basin and undeveloped acreage in Eagle Ford.

The assets sales helped ConocoPhillips reach its targeted debt amount in Q2 2018, or about 18 months ahead of schedule. The accelerated pace of ConocoPhillips’ debt reduction has helped by increased production in high margin unconventionals, according to Donald E. Wallette, Jr., ConocoPhillips’ CFO.

On a recent earnings call, Mr Wallete said that the company had generated more than $1 billion in profit and $3.2 billion in cash flow during Q2 2018. He also assured investors that, based on a projected WTI price of $65/bbl, the company is on track to realize over $12 billion in cash flow this year.

“I think the market hasn’t yet fully appreciated the cash-generating capability of our assets,” Mr Wallete said.

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