Houston-based Terra Energy Partners has agreed to buy WPX Energy’s WPX Energy Rocky Mountain subsidiary for US$910 million.
Terra said on February 9 that under the deal it would also acquire natural gas hedges holding a current in-the-money value of over US$90 million. In exchange for the hedges, Terra will assume about US$100 million worth of WPX’s future firm transportation obligations that extend up to 2022.
The deal includes 200,000 net acres (809 square km) in Colorado’s Piceance Basin with recent net production of about 500 million cubic feet (14.2 million cubic metres) per day of gas equivalent.
The assets are estimated to hold proven, developed producing reserves of 2 trillion cubic feet (56.6 billion cubic metres) equivalent and numerous low-risk drilling locations.
The transaction will also give Terra deep rights totalling 150,000 net acres (607 square km) prospective in the horizontal Mancos-Niobrara play.
Terra said it had received an increased equity commitment from existing investor Kayne Private Energy Income Fund, as well as a new equity commitment from Warburg Pincus, putting the company’s aggregate commitment at US$800 million with the two investors as equal partners.
“We are excited to announce our first acquisition since forming Terra last summer,” Terra’s CEO, Michael Land, said. “The Piceance Basin is an area that we know well and one that we believe offers considerable upside potential through focused management.”
WPX, meanwhile, has turned its focus to its operations in the Permian Basin in West Texas. It has struck over US$5.5 billion in deals over the past two years in an effort to re-shape the company, high-grade its assets and protect its financial position as it navigates the low price environment.
“Our bias for action and being opportunistic won’t change,” WPX’s president and CEO, Rick Muncrief, said. “We will pursue our very best investment options and continually evaluate how to optimise our assets.”