[Editor's note: This story was updated at 8:07 a.m. CST Jan. 16.]

WildHorse Resource Development Corp. (NYSE: WRD) will sell its northern Louisiana assets for more than $200 million as the E&P shifts to a pure-play Eagle Ford Shale strategy—underscored by the announcement of a smaller bolt-on deal in South Texas.

WildHorse, the second largest leaseholder in the Eagle Ford leasehold, said Feb. 12 it agreed to sell 90,000 net acres in Webster, Claiborne, Lincoln, Jackson and Ouachita parishes in North Louisiana for $217 million. During the next four years, contingency payments could bring in an additional $35 million based on the number of wells spud by the buyer.

In fourth-quarter 2017, the Louisiana assets averaged production of about 46.9 million cubic feet equivalent per day of gas (cfe/d).

WildHorse Louisiana Assets

The buyer of WildHorse's Louisiana assets is Tanos Energy Holdings III LLC, according to filings with the Securities and Exchange Commission.

The transaction price came in at the low end of Piper Jaffray’s value range of $200 million to $400 million valuation and below its proved reserve valuation of $331 million, senior research analyst Kashy Harrison said.

“Investors may look through valuation and focus on the strategic re-positioning of the portfolio, especially given concerns surrounding the execution of a transaction following limited third-party activity in the area moving forward and weak natural gas prices,” he said.

Gordon Douthat, a senior analyst at Wells Fargo Securities, said the divestiture wasn’t a surprise and that WildHorse received a “solid valuation and solid outlook for 2018.”

The deal is expected to close by March 30 with an effective date of Jan. 1, 2018.

In an unrelated deal, WildHorse also said Feb. 12 that it inked an agreement to acquire about 17,453 net acres in Lee County, Texas, for $19.3 million. The seller was not disclosed. The acquired properties are immediately contiguous to WildHorse’s position and include one operated and four nonoperated producing horizontal wells with average production of 59 barrels of oil equivalent per day (boe/d).

Harrison said the acquisition, which includes 110 net locations, cost about $1,100 per acre.

WildHorse Louisiana Divestiture

Following the close of the deal, WildHorse expects to hold more than 404,000 net acres in the Eagle Ford Shale. The sale of the North Louisiana assets further dilutes the company’s gas mix, with projected oil production of about 70% in 2018, said Jay Graham, chairman and CEO of WildHorse.

Building WildHorse Jan 2015 - Feb 2018

“While North Louisiana is a tremendous asset, our Eagle Ford position has comparatively more scale and significant runway with over 30 years of inventory at our current annual pace,” he said.

Monetizing the Louisiana position will also fund the company’s 2018 capex and reinforce its balance sheet. As of Sept. 30, the company had $722 million in liquidity, including $5 million in cash.

“In addition, our Lee County acquisition demonstrates our successful strategy of acquiring excellent acreage with the advantage of well results unavailable to the rest of the market,” he said.

The deal is expected to close on March 1 with an effective date of July 1, 2017.

Guggenheim Securities LLC served as financial adviser and Locke Lord LLP served as legal counsel to WildHorse on the North Louisiana divestiture.

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