Entering the fall season, the fashion for E&Ps is to get slimmer, keep the Louis Vuitton’s of their assets and toss out the must not haves.

While the 2015 A&D market continues its slump, companies trying to repay debt, sharpen their focus on core plays or digest large acquisitions are divesting in the Eagle Ford, Bakken, Uinta and elsewhere. A couple of companies are also looking to buy, but so far have been beaten out by private equity’s aggressiveness.

The lineup of potential E&Ps divesting assets starts with WPX Energy Inc. (NYSE: WPX), which is coming off the summer closure of its Permian Basin acquisition.

Quick And Decisive

After WPX’s massive $2.75 billion acquisition in the Delaware Basin closed in August, it was inevitable that the company would next head for the market to divest noncore assets.

The company has made progress more rapidly than some might have thought possible. WPX divested assets in Wyoming and the Williston Basin.

WPX is aggressively marketing midstream assets in the San Juan Basin and possibly something bigger in the Piceance Basin of Colorado. The goal: make an announcement before the close of 2015.

“We are fully engaged in debt reduction efforts,” said Rick Muncrief, WPX president and CEO. “Our ability to move quickly and decisively is one of our strengths.”

WPX is working to reduce the debt that came with its Permian purchase from privately held RKI Exploration & Production LLC. The purchase required WPX to take on RKI’s debt and to finance the acquisition through borrowings and equity offerings.

The company has targeted $400- to $500 million in divestitures by the end of 2015 as it deleverages its balance sheet. So far, it’s more than halfway toward its goal.

On Nov. 19, the company closed the sale of its Van Hook, N.D., gathering system for $185 million to a private equity fund managed by the Ares EIF Group, a subsidiary of Ares Management LP (NYSE: ARES). In September, WPX also completed an $80 million sale of its coalbed methane properties in Wyoming.

The sale of the North Dakota asset consists of an oil, natural gas and water gathering system. Under the terms of the agreement, WPX will continue to operate the system, which supports its development in the Van Hook peninsula in the basin.

WPX said it is marketing its San Juan gathering system and evaluating ways to accelerate value in the Piceance Basin. The San Juan midstream assets generate about $30 million in EBITDA annually and the company may also try to sell some of the Piceance Basin in Colorado, Muncrief said.

The Piceance generates about $175 million EBITDA, the company said.

“We’ve had overwhelming interest when we opened up discussions to accelerate value in the Piceance,” Muncrief said. “We’ve had in excess of 20 management presentation to interested parties. There’s not many assets like this out there that are being talked about.”

Muncrief said the company hopes to talk about the progress on the Piceance before the end of the year.

Already Gone

Bill Barrett Corp. (NYSE: BBG) now looks committed to its core northeast Wattenberg assets with 90% of its 2015 capital flowing to the play.

The company wants to rid itself of noncore assets and has reduced production from pending asset sales in the Denver-Julesburg (D-J) and Uinta basins.

"We remain on track to meet full-year production guidance despite shutting in approximately 1,000 boe/d of production in the Uinta Basin during the second quarter of 2015 and including a reduction in volumes associated with expected asset sales," said said Scot Woodall, president and CEO, in a Nov. 5 statement.

The company said it expects noncore asset sales of $79 million by the end of 2015. In the third and fourth quarters, the company said it:

  • Agreed to sell some properties located in the Uinta Basin for after-tax cash proceeds of about $27 million;
  • Executed agreements to sell assets in the D-J Basin for after-tax cash proceeds of about $31 million; and
  • Completed or announced three separate D-J Basin transactions for aggregate after-tax proceeds of $43 million during 2015.

After receiving interest from several suitors, Bill Barrett’s management has started a process to market its entire Uinta asset and wants to reach an agreement by year-end, said Jeffrey W. Robertson, analyst with Barclays Capital Inc.

“Based on a transaction multiple of $56,000 per boe/d, we estimate the sale of the remaining Uinta assets could raise more than $200 million,” Robertson said.

The Uinta Basin assets produced 4.2 Mboe/d in the third quarter of 2015, representing 23% of the company’s production. The company said Nov. 5 that it had shut in about 1,000 boe/d of production in the Uinta during the second quarter of 2015 with a reduction in some volumes associated with expected asset sales.

Newfield Preview

With Newfield Exploration Co. (NYSE: NFX) increasingly focused on the Anadarko Basin, it has multiple opportunities for deals.

The company isn’t formally engaged in marketing its assets but receives it frequent inquiries related to a number of properties.

Newfield said it could opt to divest its Eagle Ford position with about 10 thousand barrels of oil per day (10 Mboe/d) “sooner rather than later,” said Mike Kelly, senior analyst at Seaport Global Securities LLC.

The position is “largely drilled up and has negligible future inventory,” he said.

Newfield is also willing to entertain a sale in the Bakken, where it has about 250 locations, as a way to scale up its Anadarko Basin position or have money ready to accelerate production.

That makes a near-term divestiture unlikely, Kelly said.

The company is still committed to its 65,000 net acre Uinta Shale position but might be open to a joint venture (JV) since high well costs have limited funding there, Kelly said.

Newfield’s last major reported transaction was the September 2014 sale of its Granite Wash assets to Templar Energy LLC for $588 million.

One-way Street

Abraxas Petroleum Corp. (NASDAQ: AXAS) continues to scrutinize deals and in 2015 has made four offers but has found private equity too aggressive, Kelly said.

“AXAS currently has one offer outstanding that it feels good about and two more deals deemed to have serious potential,” Kelly said in a Nov. 18 report. “Management is clear that any deal needs to increase the quality of its asset base and be accretive to shareholders.”

At Synergy Resources Corp. (NYSE: SYRG), management is focused on aggregating acreage in the core of the Wattenberg, especially acreage that will increase Synergy's ability to drill long laterals.

“On the M&A front, no deal is deemed too large or small to pursue, if it's in the core portion of the Wattenberg,” Kelly said.

However, few transformational deals are available. Acreage swaps will continue to be a major focus for the company, Kelly said.

Darren Barbee can be reached at dbarbee@hartenergy.com.