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QEP Resources (QEP) Divests Wyoming Based Assets for $777.5M

Oil exploration and production company, QEP Resources, Inc. QEP recently agreed to sell its natural gas assets in southwest Wyoming through its wholly owned subsidiary QEP Energy Co. The transaction worth $777.5 million comprises two deals.

Details of the Deals

The first deal involves the sale of QEP Resources’ Pinedale Anticline field assets in Sublette County, WY to Oklahoma-based oil and gas company, Oak Ridge Natural Resources’ affiliate, Pinedale Energy Partners, LLC, for $740 million.

Per the accord, QEP Resources will compensate its buyer, if any deficiency costs are incurred in gas processing, NGL transportation and fractionation contracts till Dec 31, 2019. The total amount of compensation will be within $45 million. The transaction is expected to be closed by Sep 30, 2017.

We would like to remind investors that the assets in Pinedale incorporate 964 billion cubic feet equivalents (BCFE) of proved reserves. QEP Resources' net production in the first quarter of 2017, from the Pinedale assets, was 234 million cubic feet of gas equivalent per day (MMcfe/d). Around 12% of it was liquids.

On the other hand, the closing of the second deal on Jun 30, 2017, helped QEP Resources to sell some of its non-core natural gas assets, located in southern Wyoming, to an unrevealed client for $37.5 million. The assets cover 15.2 BCFE of proved reserves. In the first quarter of 2017, net production from the assets was 4 MMcfe/d that included about 2% liquids.

Deal Rationale

The deals are in line with QEP Resources’ strategy of simplifying its asset portfolio. The company expects to use the proceeds from the transactions to improve its balance sheet. As of Mar 31, 2017, QEP Resources’ long-term debt was $2,022.4 million. The proceeds can also be used to provide capital for future development projects and fund acquisition opportunities.

QEP Resources is following other energy majors who are shifting focus to the Permian Basin. The company expects to operate five of its seven active rigs in Permian Basin on an average in 2017. Other companies focusing on the Permian Basin for its relatively low cost and promising future are American Midstream AMID, Apache Corporation APA, Chevron Corporation CVX and others.

About the Company

Denver, CO-based QEP Resources is a leading independent energy company engaged in the exploration, development and production of natural gas, crude oil and natural gas liquids.

QEP Resources has been implementing aggressive cost cut initiatives, which have enabled the company to maintain its margins amid low oil prices. During the first quarter of 2017, total operating expenses of the company declined 74% from the prior -year quarter, leading to better results in the quarter. However, the company, which derives its reserves and production from oil and natural gas, is exposed to volatile commodity prices.

QEP Resources presently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price Performance

QEP Resources has lost 20.9% of its value in the last three months compared with the 10.3% decline recorded by the industry.

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