[Editor's note: This story was updated at 1:15 p.m. CST Dec. 14.]

Carrizo Oil & Gas Inc. (NASDAQ: CRZO) said Dec. 12 it agreed to sell another piece of its portfolio—the Eagle Ford—in a deal that cuts out about 24,500 net acres but strips away less than 10% of its production in the shale play.

EP Energy Corp. (NYSE: EPE) agreed to purchase the acreage, located primarily in the downdip area of the Eagle Ford’s volatile oil window, for $245 million cash. Associated net production of the assets during third-quarter 2017 was about 3,400 barrels of oil equivalent per day (63% oil, 19% gas, 18% NGL).

The deal continues a slew of noncore divestitures the Houston-based company has announced to pay down debt and offset the August acquisition of ExL Petroleum Management LLC’s Delaware Basin assets. In 2017, Carrizo has signed or closed $530 million worth of asset sales—excluding contingency payments.

Carrizo received between $5,000 and $5,500 per net undeveloped acre for the asset, based on an estimated $120 million worth of production, Tudor, Pickering, Holt & Co. (TPH) said in a Dec. 12 report.

“Deal metrics appear to be neutral at first blush, but positive to see funds on the table to bring forward value in the Phantom Delaware acreage, particularly as budget allocation has gradually shifted in favor of the Delaware asset,” TPH analysts said.

“Our activity in the Eagle Ford Shale is expected to be focused on the updip volatile oil window of the play,” S.P. “Chip” Johnson IV, Carrizo’s president and CEO, said in a statement. “Given this, we believe it made sense to bring the value of these assets forward and use the proceeds to further strengthen our balance sheet by retiring additional debt.”

Following the close of the transaction, Carrizo will hold about 78,500 net acres in the Eagle Ford Shale, exclusively located within the core volatile oil fairway, according to the company release.

Carrizo purchased its Delaware Phantom acreage from ExL Petroleum in August. The position includes 16,488 net acres in Reeves and Ward counties, Texas. The company paid for $648 million for the assets and could owe another $125 million in contingency payments over several years.

Carrizo initially targeted $300 million in divestitures in the Appalachian and Denver-Julesburg basins to balance out the Delaware transaction’s cost. The company said Nov. 8 it was also evaluating the sale of some Delaware or Eagle Ford assets that weren’t on the company’s front burner.

“With asset sales likely behind us, we’ll be watchful for longer-dated execution on the Phantom [Delaware Basin] acreage before becoming more constructive,” TPH analysts said.

In early November, Carrizo said it had recently brought two wells located on the northwestern part of the Phantom acreage online, one in the Lower Wolfcamp A and the other in the Upper Wolfcamp B.

At the time, Carrizo was running four horizontal rigs in the Delaware and had recently secured another Generation 5 rig. The company’s plans for 2017 was to drill about 13 gross (10.4 net) operated wells and complete 17 gross (13.4 net) operated wells in the play.

In the Eagle Ford, Carrizo expected to drill about 90 gross (77 net) operated wells and complete 88 gross (82 net) operated wells during 2017.

Carrizo said it expects to close the Eagle Ford divestiture by the end of January. The effective date of the transaction is Oct. 1.

Emily Patsy can be reached at epatsy@hartenergy.com.

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