ConocoPhillips to Sell $3 Billion Worth of Assets
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Energy giant ConocoPhillips has agreed to divest assets in the San Juan Basin in the Southwestern U.S. to Hilcorp Energy Company for $3 billion. The partnership will pay $2.7 billion in cash as well as a contingent payment up to $300 million. The deal is expected to close in the third quarter of 2017, subject to specific conditions precedent being satisfied as well as regulatory approval.

The deal comes two weeks after Houston-based oil explorer’s $13.3 billion sale of Canadian oil sands assets to Cenovus Energy Inc. By far, ConocoPhillips has announced more than $16 billion of assets sales in 2017. The deal price with Hilcorp includes incentive payments of about $300 million.

ConocoPhillips San Juan Basin

San Juan Basin, New Mexico

Rushed Divesture

In November, ConocoPhillips said it planned to divest assets of $5 billion to $8 billion to delever and core up its asset base by 2018. The energy giant plans to use the sale proceeds to streamline its business and improve the company’s balance sheet.

ConocoPhillips CEO Ryan Lane said, “These transactions will materially reduce our exposure to North American gas and achieve an immediate step change improvement in our balance sheet and cash margins, while accelerating our return of cash to shareholders. Our company will be more focused, far stronger financially, and well positioned to execute our disciplined, returns-focused value proposition.”

ConocoPhillips said the San Juan Basin assets saw a production of 124 thousand barrels of oil equivalent per day in 2016. In addition, natural gas made up roughly 80 percent of this production. The cash generated from the operations at the assets last year was around $200 million.

According to Hilcorp, it estimates 2017 production from the San Juan assets to peak 115 thousand barrels, consisting of about 80 percent natural gas and 20 percent natural gas liquids.

Hilcorp is headquartered in Houston and is one of the largest privately-held independent exploration and production companies in the world. Its affiliate, Hilcorp San Juan, is a partnership between Hilcorp and The Carlyle Group.

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