QEP Resources Inc. (NYSE: QEP) looks to be a survivor amid the downturn, carefully conserving its cash but willing to make a deal on the order of $1 billion or more when the time is right.

Buying or selling for most E&Ps deals come down to less than ideal timing. Whiting Petroleum Corp. (NYSE: WLL) still wants to cross off at least $800 million in assets, but the market hasn’t quite cooperated.

Parsley Energy Inc. (NYSE: PE) is still waiting for a clear signal on whether to keep its Delaware Basin assets, which it has continued to add, or jettison them.

Ending the second quarter of 2015, QEP had $446 million in cash, another $150 million coming in from a tax clawback and an unsecured revolver through 2018 of $1.8 billion that won’t be affected by bank redeterminations—and also has a zero balance.

“Overall, we think QEP is squarely in the survivor camp given its asset base, cash position [$450 million],” said David Tameron, senior analyst with Wells Fargo Securities, in an Oct. 12 report.

Tameron recently met with the company’s CFO and director of investor relations. The potential for M&A remains strong.

“Management continues to remain active in the M&A market, with we believe a bolt-on in an existing area most likely,” he said. “We think the company could do something up to $1.5 billion.”

QEP’s management had been looking for an acquisition before the “OPEC Black Friday,” Tameron said. But as prices dropped, it became more difficult to make a transaction.

QEP is interested in several areas, including the dominant Bakken, Eagle Ford as well as Rockies gas assets.

Tameron said the company is looking to build “critical mass” and may go after an Eagle Ford transaction, where it has no position. The company could also expand its 26,000 net acres in the Permian.

Company executives said they would be comfortable engaging in a transaction up to $1- to $1.5 billion in size,” with amounts of up to $2 billion likely a stretch.

“Our take is that any corporate transaction would likely be structured as an equity for equity, while any asset purchase could be financed with some combination of cash, asset sale, debt, or equity depending on ultimate size,” Tameron said.

So far, QEP has given no hints of a divestiture, especially after a 2014 run of sales generated $3.3 billion and will keep QEP’s balance sheet strong.

QEP’s own portfolio will determine how it spends its 2016 capex, which will be down 35% in 2016 to $650 million. Production is projected to be flat.

Tameron said QEP’s “pecking order” for its assets—and how money is spent—is:

  • South Antelope (Bakken);
  • Permian (Spraberry);
  • Fort Berthold (Bakken);
  • Haynesville;
  • Pinedale; and
  • Uinta (Lower Mesaverde)—in its infancy.

Irons In The Fire

Whiting Petroleum swallowed some fairly distasteful medicine early in the downcycle, cutting its rig count to eight from 24 and slashing capex to live within cash flow in 2016, said Mike Kelly, analyst with Seaport Global Securities, in an Oct. 7 report.

Kelly met with Whiting management and saw no signs liquidity would be a problem for the company, even if it’s unable to hit its divestiture goals.

However, the company also jumped to a record 135,835 net barrels of oil equivalent per day (boe/d) in the second quarter of 2015. In addition to absorbing Kodiak Oil and Gas, the company has enhanced its completions to produce up to 50% more.

Following the $6 billion, stock-for-stock Kodiak deal, Whiting said in February it had plans to sell a $1 billion in assets.

In the first half of 2015, the company sold about $300 million with 26.2 MMboe, 67% oil.

Whiting may have three or four additional “irons in the fire, which we think should garner a minimum of $800 million in potential proceeds,” Kelly said.

Whiting will lose about $200 million in EBITDA in the process.

“Management relayed confidence that each of its key assets has garnered strong interest, and the market seems to have recently strengthened, especially for PDP assets,” Kelly said.

Whiting expects to be undrawn on its $3.5 billion revolver commitment after third-quarter 2015.

Permian Patience

After four small- to mid-size deals in the Permian Basin, Parsley Energy may be in the mood to sell if its Southern Delaware Basin fails to live up to expectations.

The company has compared the Delaware to its Midland assets.

For now, Parsley is participating in a nonoperated well and plans to drill a well in Pecos County, Texas, later this year, said Robert Du Boff, analyst with Oppenheimer & Co., in an Oct. 12 report. The company’s tests there stretch back to at least the second quarter of 2014.

Management emphasized that returns must compete with the Midland Basin’s IRRs, which are greater than 30%, or it would sell the asset.

“While wells may be just as productive, the key variable will be well costs,” Du Boff said.

Parsley owns about 30,000 acres in the Delaware and vertical exploratory wells have had strong oil production.

The company is targeting the upper Wolfcamp and in the second half of 2015 will continue appraising its Trees Ranch prospect.

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