Sentinel Peak Resources California LLC, backed by Houston-based private equity firm Quantum Energy Partners, has agreed to acquire Freeport-McMoRan Inc.’s onshore oil and gas properties in California for $742 million.
The properties are currently producing 28,000 b/d of oil, including 18,000 b/d in the San Joaquin basin, and 10,000 b/d in the Los Angeles basin and coastal properties. Sentinel says it has identified a number of economic development projects across the assets that are attractive in the current commodity price environment.
Under the deal’s terms, Freeport-McMoRan will receive $592 million in cash at closing and an additional $50 million/year in each of 2018, 2019, and 2020 if the Brent crude oil price averages $70/bbl or higher in that calendar year. Sentinel also will assume future abandonment obligations associated with the properties, which had a book value of $100 million as of June 30. The deal is effective July 1 and is expected to close in the fourth quarter.
Sentinel was formed this year by Quantum Energy Partners and Michael Duginski, an oil and gas executive who was previously chief operating officer of Berry Petroleum Co. Duginski, currently Sentinel’s chief executive officer, will be joined by Chief Financial Officer George Ciotti and Chief Operating Officer Tim Crawford, both of whom worked with Duginski at Berry, and Vice-Pres. of Operations in the Los Angeles basin George Paspalof, an experienced California operator (OGJ Online, Oct. 14, 2016).
Sentinel will hire from existing Freeport-McMoRan staff as well as from other sources. In addition to its Denver office, the firm plans to open offices in both Los Angeles and Bakersfield.
Phoenix-based Freeport-McMoRan last month sold its deepwater Gulf of Mexico assets to Anadarko Petroleum Corp. for $2 billion (OGJ Online, Sept. 12, 2016). The firm, which recently restructured subsidiary Freeport McMoRan Oil & Gas (FMOG) into an operating division, has pledged to reduce its debt and direct resources to its copper business (OGJ Online, Apr. 6, 2016).
Upon closing of the Anadarko and Sentinel deals, Freeport-McMoRan’s oil and gas assets will include oil and gas production onshore South Louisiana and on the shelf of the gulf, oil production offshore California, and gas production from the Madden area in central Wyoming. Those properties during the second quarter produced 8,600 b/d of oil and NGLs and 78 MMcfd of gas.
Contact Matt Zborowski at [email protected].