Newfield Exploration Co. (NYSE: NFX) has agreed to sell its Granite Wash assets to Templar Energy LLC to pay down some long-term debt with the $588 million sales price, Newfield said July 29.

Newfield's Granite Wash position includes 42,000 net acres and net daily production of nearly 65 million cubic feet equivalent per day (MMcfe/d), 60% of which is natural gas. It is considered a noncore asset for The Woodlands, Texas company.

Proved net reserves at year-end 2013 were about 38 million barrels of oil equivalent (MMboe).

Newfield intends to use proceeds from the sale on its senior subordinated notes due in 2018. The Granite Wash sale should more than offset Newfield’s expected funding gap in 2014, which Jefferies Equity Research estimates at roughly $400 million.

“The sale price is reasonable, and the strategic decision to continue to monetize non-core assets to facilitate investment in the Anadarko Basin is a positive for the shares,” said Subash Chandra, equity analyst for Jefferies Equity Research.

The announced sale lines up with the company’s objectives in its three-year plan, said Larry Massaro, Newfield executive vice president and CFO.

"The sale further demonstrates our willingness to monetize non-strategic assets, high-grade our portfolio, accelerate our domestic growth programs and strengthen our balance sheet,” he said. “Our future investments will be in high-return, scalable resource plays where we can drive value through repeatable application of our core competencies in drilling and completions.”

Newfield made the announcement as it released earnings report, with earnings per share of $0.43, below consensus estimates of $0.52.

J.P. Morgan Securities and Wells Fargo Securities acted as Newfield's financial advisors on this transaction. Oklahoma City-based Templar operates through Le Norman Operating LLC.

The sale is expected to close in the third quarter of 2014 with an effective date of July 1.

China Update

Newfield’s deal doesn’t mean the company plans to drop divestiture of its Chinese assets.

Newfield disclosed that the company is now completing its planned repairs to its Pearl facility in the South China Sea.

“Divestiture remains on track for first production in the fourth quarter of 2014 and divestiture by late 2014 or early 2015 ultimately increases their financial capacity,” said Pearce Hammond, managing director and co-head of exploration and production research for Simmons & Co. International.

Establishing first production is expected to enhance the bids received for the asset. The PV-10 value of the Pearl facility at year-end 2013 was $900 million.

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