Energen Corp.’s (NYSE: EGN) long slog to Permian pure player—a journey it began in 2009—is nearing the end with agreements to sell noncore assets in the Delaware and San Juan basins.

Energen said it has closed or signed purchase and sale agreements with multiple undisclosed buyers for gross proceeds of $551.7 million.

Sold were:

  • About 55,000 net acres in the Delaware Basin;
  • Net oil production in April of 9 Mboe/d; and
  • Proved reserves, as of Dec. 31, of 55 MMboe.

Most of the production sold is in the San Juan Basin, which is about 34% oil.

The company raised its 2016 capital spending to about $450 million. That’s up about $75 million, or 20%, more at the midpoint of its previous guidance, said Jeffrey W. Robertson, an analyst for Barclays.

With the sale of its San Juan assets, Energen said it has completed its transition to a pure Permian Basin operator. The company will now concentrate on drilling and developing its positions in the Midland and Delaware basins, where it estimates a remaining net resource potential of 2 Bboe.

James McManus, Energen’s chairman and CEO, said proceeds from the sales exceeded the company’s expectations and strengthened its balance sheet.

The company is in a position to pursue additional capital investment in the Permian through 2017, including more drilling, development and acquisitions. “To that end, we are increasing our capital investment in 2016 to approximately $450 million to further build up our inventory of drilled but uncompleted wells (DUCs) at year end,” McManus said.

Energen has earmarked $300 million for the Midland Basin and $130 for the Delaware.

Energen, Delaware, Midland, A&D, Permian, pure play

Robertson said Energen has two rigs running in the Permian, with one in the Midland Basin and the other in the Delaware.

In the Midland Basin, the company has about 68,500 net acres with 2,546 net identified locations. The acreage encompasses seven horizontal formations. Energen estimates its lease operating expensein the play at $6 to $6.50.

Following the close of its divestitures, Energen will hold about 42,200 net acres in the Delaware Basin in Texas and New Mexico. There it has 954 net identified locations in four Wolfcamp Shale formations.

“The Wolfcamp, particularly in the Midland Basin, has been the main driver of the company’s growth,” Robertson said. “This looks set to continue as the company prioritizes the Wolfcamp in the Delaware, which makes up over half of its inventory in the play.”

Of 200 wells Energen has drilled in the Midland Basin, company statistics show 164 targeted the Wolfcamp A and B shales.

The company’s primary mission in the Delaware Basin will be to increase value on about 31,200 net acres in Loving and parts of Reeves and Ward counties, Texas.

“On this core acreage position, the company has identified 675 net locations, including 148 net locations with at least 10,000-foot laterals and another 217 net locations with average lateral lengths of 7,500 feet,” the company said.

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