Oil and gas companies working through the industry’s trough find that joint ventures, farm-outs and monetizing hedges are better strategies than selling assets in the down market. This according to a panel at Oil and Gas Investor and A&D Watch’s A&D Strategies & Opportunities conference in Dallas.

“We decided that joint ventures are one of the best avenues to pursue,” said Toby Darden, chairman of Forth Worth-based Quicksilver Resources Inc. “It allows growth and expansion instead of shrinkage though asset sales. The relationships made through a JV can lead to other opportunities, which are the greatest upside for doing that.”

In May, Italian integrated-energy company Eni SpA acquired a 27.5% interest in core Barnett shale acreage in Tarrant and Denton counties, Texas, from Quicksilver for $280 million in cash.

“As it turned out, Eni found us,” said Darden. “They elected to explore in the U.S. to learn the shale technology because they have worldwide properties of shale and coal. They chose the Barnett because it has the lowest development costs and is the birthplace of horizontal-drilling technology. It also provided the best opportunity to learn the shale-gas technology and cost control.”

Eni was also intrigued by Quicksilver’s midstream presence, operated through the E&P’s “relatively small shop,” said Darden. Eni wanted to avoid working with a large corporate structure.

Darden said Quicksilver continues to pursue JV opportunities for its other plays, particularly in British Columbia’s Horn River Basin.

“Companies that have made it this far in the business generally are going to make it a little further,” he said, noting that today’s economic, political, regulatory and tax challenges necessitate creative solutions.

Other E&Ps choose to farm out properties. Recently, Denver-based Whiting Petroleum Corp. farmed out a 50% working interest in the western portion of its Sanish Field in Mountrail County, North Dakota, and sold a 50% interest in a gas plant and gathering system to an undisclosed private company for $107.3 million (see “Bakken Breakout” in this issue). The private company will pay 65% of Whiting’s net-working-interest completed-well cost to receive 50% of Whiting’s working interest and net revenue interest in the first and second wells planned for each of the units. Whiting will remain operator.

Whiting’s farm-out deal achieved its goal of avoiding the outright sale of assets, said panelist James Brown, senior vice president.

“After the commodities prices fell, we thought we might have a cash shortfall for our four-rig drilling program. We wanted to hold onto our leases. If we let them go, and tried to come back in, we wouldn’t get anywhere near our initial cost of about $100 an acre,” he said.

One asset-management tool that producers still shy away from is the master limited partnership. “Although deal flow has picked up for MLPs, there are no new upstream MLPs on deck,” said panelist Steve Pruett, president and chief financial officer for Midland, Texas-based Legacy Reserves LP.

Whether producers choose to sell, partner or drill, “It is all about the money, and how to choose the right alternative, and when,” said panelist Sylvia Barnes, Houston-based managing director of energy investment banking for SMH Capital Inc. “You will always need cash to buy and hold leases, drill wells or fund multistage fracs.”

Get cash or be creative, she said, using the example of Chesapeake Energy Corp.’s volumetric-production-payment strategy, the fifth of which was completed in August. Monetizing hedges is another avenue, she said. She advised producers to “Wait for the right deal, because patience really does pay off.”