Within the past month Apache Corp. (NYSE: APA) has cashed in several of its midstream assets in the Permian Basin—following the trend of E&Ps selling ancillary assets for big money in the 2015 downturn.

In better times, E&Ps built midstream assets to their drilling locations and some companies amassed so much infrastructure they spun it off into new companies. Since the slide in oil prices, the assets have become increasingly expendable and, in some cases, the money stuffed under E&Ps’ proverbial mattresses.

Navitas Midstream Partners LLC said Dec. 2 that it acquired Apache's natural gas gathering and processing assets serving the Midland Basin in Midland and Upton counties, Texas.

The terms of the transaction weren’t disclosed. Navitas said it financed the deal with equity from its sponsor, Warburg Pincus.

In November, Apache also sold its interest in the Deadwood natural gas processing facility in the Permian Basin. The deal, with EnLink Midstream Partners LP (NYSE: ENLK), was valued at about $40 million.

Apache’s deal with Navitas includes about 114 miles of low and high pressure natural gas gathering pipelines ranging in size from two-inches to 12-inches in diameter and a cryogenic processing plant. The plant has capacity of about 30 million cubic feet per day.

After paying down $900 million of long-term debt in the third quarter, the company reported debt of $8.8 billion as of Sept. 30. The company has available liquidity of more than $5 billion, including cash on hand and available borrowing capacity under its $3.5 billion committed credit facility.

Since then the company has boosted its liquidity even more with about $500 million in cash through “signed agreements to sell certain non-upstream assets,” Apache said in a Nov. 5 release.

Midstream Bonanza

Midstream companies have seemed more than willing to pick up the assets E&Ps can live without.

Hess Corp. (NYSE: HES) sold 50% interest in its Bakken Shale midstream assets in June for $5.4 billion. That same month Pioneer Natural Resources Co. (NYSE: PXD) also sold its Eagle Ford midstream assets for $1 billion.

More recently, Bonanza Creek Energy Inc. (NYSE: BCEI) said it entered an agreement to sell its midstream assets in Colorado’s Wattenberg.

Bonanza Creek is poised to enter the new year with nearly $600 million in liquidity thanks in part to a sale of midstream assets snuck in at the end of the third-quarter.

The Denver company turned in a solid quarter with positive well results from its Wattenberg acreage and the sale of its Rocky Mountain Infrastructure LLC (RMI) subsidiary for $255 million in cash. The buyer of RMI, Meritage Midstream Services IV LLC, will pay $175 million upon closing to Bonanza.

As part of the sale agreement, Meritage has given Bonanza a baseline of drilling and completion activity required to receive the remaining $80 million of proceeds. As a result, Bonanza is gaining a clearer outlook for the coming year, said Irene O. Haas, senior equity analyst at Wunderlich.

"As it stands, BCEI is well-positioned to tackle 2016 and focus on upstream: improving well economics, payback periods, and returns in the Wattenberg," Haas said in a Nov. 9 report.

Haas estimates Bonanza received $3 per share more than what was originally expected from the RMI sale. Profits, in turn, could clear some of the company’s debt.

At the end of the third-quarter, the company had borrowings under its credit facility of $69 million, a letter of credit totaling $12 million, and cash totaling $25.3 million. The company also has two outstanding issues of unsecured high-yield bonds consisting of $500 million notes due in 2021 and $300 million notes due in 2023.

Bonanza could reduce debt even more with a sale of its Cotton Valley assets in southern Arkansas, Haas added.

The company’s midstream sale to Meritage is expected to close by Dec. 31 but no later than Jan. 31, subject to customary closing conditions, according to the release.

As a part of the continued build-out of the midstream system, Meritage Midstream has agreed to build two new central production facilities (CPF) in 2016. One will be built on the Bonanza's northern area, and one on its legacy acreage.

Contact the author, Emily Moser, at emoser@hartenergy.com.

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