Oxy, Ecopetrol expect yearend production start from Midland basin combine

The start of production from two wells drilled and in completion stage in the recently closed Permian basin joint venture between Occidental Petroleum Corp. and Ecopetrol SA is expected by yearend, Ecopetrol said.

The two companies entered the combine in July to develop 97,000 net acres of Oxy’s Midland basin properties in the Texas counties of Midland, Martin, and Howard (OGJ Online, Aug. 1, 2019).

Presently, there are two rigs operating in the area. Four rigs are expected to be in operation by yearend 2020. Through the JV, Ecopetrol Group expects to incorporate proved reserves of 160 million boe by yearend.

Ecopetrol Permian LLC acquired a 49% stake in Rodeo Midland Basin LLC. After the transaction, which has an announced value of $1.5 billion (50% in cash and 50% in carry), Oxy will retain 51% of Rodeo Midland Basin through Occidental Midland Basin LLC.

Ecopetrol made an initial payment of $876.5 million (equivalent to 50% of the total transaction value) comprised of $750 million corresponding to its share of the transaction value of the JV, and $126.5 million corresponding to the estimated expenditures of the development plan in 2019 between the effective date of the JV (Aug. 1) and yearend.

The JV—part of Oxy’s initiative to maximize shareholder value following the close of its acquisition of Anadarko Petroleum Corp. in August—allows the company to accelerate development plans in the Midland basin, where it currently has minimal activity (OGJ Online, Aug. 8, 2019). The company also has completed the sale of select noncore assets for $200 million, which will be used for deleveraging.

In a press statement, Oxy Pres. and Chief Executive Officer Vicki Hollub said she expects the actions in progress “will allow us to exceed the upper end of our original $10-15 billion divestiture goal by the middle of 2020.”