Chevron Corp. (NYSE: CVX) has agreed to sell 64,500 net acres in the Central Basin Platform and Northern Shelf of West Texas—about 5% of its total Permian basin holdings—to private-equity backed E&P Sabinal Energy LLC.

Sabinal Energy, backed by the Kayne Private Energy Income Fund LP, said Sept. 12 it acquired the assets producing about 7,500 barrels of oil equivalent per day (boe/d) in Hockley, Terry and Gaines counties, Texas. Terms of the transaction were not disclosed, but analysts estimated the acreage and production are worth roughly $400 million.

Chevron has said it wants to sell up to 200,000 Permian acres—about 13% of its 1.5 million acres in the Midland and Delaware basins.

Tudor, Pickering, Holt & Co. (TPH) said Chevron’s divestiture is its first major Permian sale and are “clearly outside of the core focus areas for Chevron.” Based on $40,000 per boe/d, the proved developed producing value is about $300 million. TPH estimated the undeveloped acreage has a value of $100 million.

So far this year, the company has agreed to part with roughly 80,000 net acres. In a July investor presentation, Chevron management said it had closed seven deals in the Permian totaling just under 20,000 net acres.

Jay Johnson, executive vice president for Chevron upstream, said on the July conference call that the company is managing its Permian portfolio through acreage swaps, joint ventures, farm-outs and sales.

“We have identified between 150,000 and 200,000 acres in the Midland and Delaware Basins that we plan to transact to generate more immediate value,” Johnson said. “Generally, the highest-value transactions are swaps to core up acreage and enhance value through long laterals and other infrastructure efficiencies.”

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Johnson said in one transaction the company effectively more than tripled the value of a portion of its acreage “simply by enabling longer laterals.” He did not offer additional detail.

He added that the company has grouped its remaining acreage into a number of packages that are actively being marketed.

Overall, the global company classified $3.79 billion of net properties, plant and equipment as “assets held for sale” on June 30. The assets are associated with upstream and downstream operations that are anticipated to be sold within the next 12 months, according to regulatory filings.

The revenues and earnings contributions of these assets in 2016 and the first six months of 2017 “were not material,” Chevron said.

Sabinal CEO Bret Jameson said the acquisition is the first since the company was formed in summer 2016 with a $300 million commitment from Kayne. Jameson previously served as COO for privately-held Lewis Energy and as Devon Energy Corp.'s (NYSE: DVN) vice president for the company’s Anadarko Basin business unit.

“The Central Basin Platform is an area that we know well and one that we believe offers considerable upside potential through focused management,” he said. “We are happy to welcome aboard many of the field employees from Chevron that will provide continuity which will be extremely helpful as we grow our position both organically and through future acquisitions in the area.”

Danny Weingeist, managing partner at Kayne, said the assets are a “tremendous fit, not only for Sabinal, but also for our fund’s strategy.”

Sabinal has actively sought acquisitions in the Rockies, Midcontinent and Texas.

Wells Fargo Bank, National Association provided a sole underwritten commitment for debt financing as part of the acquisition. DLA Piper LLP (US) and Kirkland & Ellis LLP served as legal advisers to Sabinal. Mobius Risk Group served as marketing and derivatives advisor to Sabinal.

Darren Barbee can be reached at dbarbee@hartenergy.com.

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