Occidental buying and selling in Permian

22 June 2017, Week 24, Issue 463

Occidental Petroleum has announced this week that it has agreed to a number of separate purchase and sale transactions in the Permian Basin. In one of the deals, Houston-based Occidental will buy Hess’ stake in enhanced oil recovery (EOR) assets in the Permian for US$600 million in cash.

The transaction includes the Seminole-San Andres unit, in which Hess has a 34.2% interest, and the Seminole gas processing plant, in which it has a 46.6% interest, both of which are located in Texas and operated by Hess. It also includes the Hess-operated West Bravo Dome carbon dioxide (CO2) field in New Mexico, in which the company holds a 100% interest, and a 9.9% non-operated interest in the Bravo Dome unit, also in New Mexico. These assets produced an average of 8,200 boepd in 2016 net to Hess, the company said in a statement.

The deal cements Occidental’s status as the dominant US producer of oil via carbon injection, Reuters reported. EOR is used to target conventional reserves in the Permian, and its use has helped to shield some regions from the worst of the oil price downturn as operators including Hess and Occidental kept their EOR operations going while scaling back on shale drilling.

Separately, Occidental said it would sell “non-strategic” acreage in the Permian, also for US$600 million, to undisclosed buyers and acquire other acreage closer to its existing wells. The deals will effectively cut Occidental’s holdings in the Permian by 13,000 net acres (53 square km). The company said the acreage it was selling was located in acreage in Texas’ Andrews, Martin and Pecos counties, while it was adding incremental acreage to enhance a future core development area in Glasscock County.

On a combined basis, Occidental said the transactions required no net cash outlay and added roughly 3,500 boepd to its production.

“These transactions support our pathway to breakeven at US$50 after dividend and production growth and our long-term, returns-focused value proposition,” Occidental’s president and CEO, Vicki Hollub, said in a statement.

“The combined results accelerate cash flow and enhance our future returns by exchanging low-priority development acreage for low decline, low capital intensity EOR production that has significant opportunity for value improvement.”

 

Hess said the proceeds from its sale to Occidental would be used to fund the company’s “strong growth opportunities”. Reuters noted that these included North Dakota’s Bakken play and the US Gulf of Mexico.

Edited by

Anna Kachkova

Editor

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