QEP Energy Co., a wholly owned subsidiary of Denver-based QEP Resources Inc., has agreed to acquire 13,800 net acres in the core of the northern Midland basin from an undisclosed seller for $732 million.
The move, part of QEP’s growing emphasis on the Permian basin, will be funded with proceeds from the firm's $740-million sale of its Pinedale Anticline field assets in Wyoming to Pinedale Energy Partners LLC, announced earlier this week, as well as with cash on hand (OGJ Online, July 25, 2017).
The properties, which are in Martin County, Tex., include 730 potential horizontal drilling locations over the Middle Spraberry, Spraberry shale, Wolfcamp A, and Wolfcamp B, with further upside potential from additional locations in emerging prospective zones and increased well density, QEP says.
The acreage footprint allows for nearly 60% of the identified potential horizontal drilling locations to be developed with 10,000 ft or longer laterals, and its proximity to the company’s existing acreage provides opportunities to further optimize lateral length and share existing infrastructure, the firm says.
Nearly all of the acreage is held by production to the Wolfcamp formation or deeper, and the average working interest is 88%, subject to a 25% royalty burden. Current net production from the assets is 635 boe/d, of which 71% is crude oil, from 99 vertical wells. QEP estimates net proved reserves of 44 million boe and total net recoverable resources of 295 million boe on the properties.
The deal, expected to close before the end of October, increases QEP’s Permian position to 43,000 net acres with 1,900 potential horizontal drilling locations, all in the core of the northern Midland basin.
“During the second quarter 2017 we made significant progress in the Permian basin by increasing drilling activity on our Mustang Springs asset and aggressively developing our County Line asset, resulting in record net equivalent production in the Permian basin of 21,200 boe/d,” commented Chuck Stanley, QEP chairman, president, and chief executive officer, in the firm’s second-quarter results.
QEP at the end of the second quarter had five operated rigs in the Permian, with one on its County Line acreage and four at Mustang Springs. The firm added another Permian rig this month.
Contact Matt Zborowski at [email protected].