QEP Resources Exits Haynesville In $735 Million Sale To Aethon Energy
Emily Patsy Associate Managing Editor, Digital News Group Hart Energy
Monday, November 19, 2018 - 5:45am
The sale follows several other divestitures marking regional exits including QEP Resources’ recent $1.7 billion Williston sale as the company aims to become a Permian Basin pure-play. (Source: Hart Energy)
QEP Resources Inc. (NYSE: QEP) said Nov. 19 it will exit the Haynesville Shale region in a divestiture set to finalize the company’s Permian pure-play strategy.
Aethon III, an affiliate of Dallas-based private investment firm Aethon Energy Management LLC, agreed to buy QEP’s Haynesville/Cotton Valley business in northwest Louisiana for $735 million. Aethon III is an investment vehicle formed to acquire onshore assets in North America in partnership with the Ontario Teachers’ Pension Plan and Redbird Capital Partners.
QEP’s Haynesville/Cotton Valley business covers about 49,700 net acres including 137 gross operated producing wells in Northwest Louisiana. Production during the third quarter averaged about 49,500 barrels of oil equivalent per day of production, 100% of which was dry gas. The company also owns and operates midstream infrastructure on a majority of its Haynesville assets.
“The sale of our Haynesville/Cotton Valley business is an important next step in our process of becoming a Permian pure-play company,” Chuck Stanley, QEP chairman, president and CEO, said in a statement.
The sale follows several other divestitures within the past year that marked regional exits by QEP including the roughly $1.7 billion agreement to sell the entirety of its Williston Basin assets in North Dakota and Montana to NGP-backed Vantage Energy earlier this month.
Stanley said proceeds from the Haynesville sale will be used to fund the ongoing development of QEP’s core Permian assets, reduce debt and return cash to shareholders through a share repurchase program.
The company’s latest sale comprises natural gas and oil producing properties, undeveloped acreage and associated gas gathering and treating systems in the Haynesville/Cotton Valley.
QEP put one gross operated well on production in the Haynesville during the third quarter (average working interest 100%). The well had a peak 24-hour IP rate of 34 million cubic feet equivalent per day (100% gas) with a lateral length of 10,622 feet.
Though, by the end of the third quarter, QEP had no drilling rigs in the Hayensville/Cotton Valley region.
As part of the divestiture, Aethon Energy has also agreed to assume all firm gas transportation agreements related to these assets. In addition, QEP will novate natural gas derivative contracts covering roughly 40 billion cubic feet of gas for the last 11 months of 2019 to Aethon.
QEP said it expects to close the Haynesville divestiture in January, subject to closing conditions including regulatory approval. The effective date of the transaction is July 1.
Latham & Watkins LLP provided legal counsel to QEP for the transaction. Weil, Gotshal & Manges LLP and Sidley Austin LLP were Aethon Energy’s legal counsel.
Sorry to see them go. Questar/QEP's Salt Lake City culture, which was also included in its land department out of Denver, will be missed. My family will always be indebted to a senior landman who stepped up and gave us a remarkable, once-in-a-life lease with a free-royalty clause (that actually held up, unlike Chesapeake's), some very serious bonus money, and 1/4 royalty. They were good guys who stood by their word. More honest than most. The oil patch truly needs more like 'em. Louisiana's lost and Permian's gain.
QEP, like most operators, has pluses and minuses. The major take away here IMO is that QEP lost interest in their Haynesville assets in 2011 and has done nothing but re-fracs until early this year when they drilled their first latest version Haynesville Shale well. It was a very good well in Bienville Parish that boosted the industry's opinion of an area that had lesser perceived rock quality. Since Aethon has operations in this corner of the play, it makes sense that they would care to acquire the QEP rights, wells and infrastructure. Aethon has a reasonably aggressive drilling program that should benefit mineral lessors in the QEP units and may even be a reason for Aethon to attempt some step-out wells that would increase the area proven to be economic and benefit un-leased or under-developed mineral rights.
True, Skip. They pulled back on the reins and didn't chase the rock like other operators after QEP's initial gamble on leases, which were inked at much higher NG prices. So they got caught in a cash squeeze when reality set in. Yet in one way, landowners benefited from the higher-lease prices and from no drilling, in hindsight, now that NG prices are much higher and there are wells permitted to be drilled in at least one of their old locations, which means with the new completion technology and the higher NG prices, the landowners are going to make MUCH MORE MONEY than they would've if they'd been drilled years ago. Plus, some folks might not realize it, but when the bonus money gets so very high, that windfall can really make a huge difference for many years compared to a one-well/one section old style frack. If I took the time to actually add up the numbers, I'm guessing that the big bonus money might almost outweigh the money from production on one of QEP's old style wells. So I personally have no complaints. It was nice to deal with a landman who did what he said he'd do and coughed up the beaucoup bucks. Great guy. I'd sign with him again if I ever had the opportunity.