Riviera Resources To Exit Hugoton Basin In $295 Million Sale

Riviera Resources Inc. is exiting the Hugoton Basin through a sale on Aug. 28 of its remaining properties in the basin located in southwest Kansas for $295 million to an undisclosed buyer.

The independent oil and gas company has been working to simplify the multibasin portfolio it inherited from its spinoff from Linn Energy last year. Divestitures so far have included the sale of its Arkoma Basin and Michigan assets plus a portion of its Hugoton assets in a transaction that closed in May.

The Hugoton Basin, geographically centered in southwest Kansas, is Riviera’s largest producing asset, according to the company website.

Riviera said the Hugoton transaction contract price represented roughly 45% of its market capitalization, according to the closing price of the company’s stock on Aug. 23. The company also expects to realize about $10 million in general and administrative cost savings from the sale starting in first-quarter 2019.

The company’s interest in Hugoton properties to be sold consist of the following:

• Upstream properties of about 4,000 wells with second-quarter net production of roughly 104 million cubic feet equivalent per day; and
• Natural gas processing plants located in Grant County, Kan., which include the Jayhawk natural gas processing plant with inlet capacity of 450 MMcf/d, current delivered volumes of about 260 MMcf/d, and the Satanta natural gas processing plant that is currently inactive.

After closing the transaction, Riviera will continue to own upstream assets in East Texas, North Louisiana, the Anadarko Basin and the Uinta Basin. Additionally, the company said it continues to grow its midstream business, Blue Mountain Midstream LLC.

David Rottino, president and CEO of Riviera, said the company will continue to focus on monetizing assets to “unlock the sum of the parts value.”

“Accomplishing a complete regional exit through these transactions not only highlights the value of our assets, but our capability to resourcefully maximize value given the current market environment, generating significant proceeds that we can use to return capital to shareholders,” Rottino said in a statement.

Proceeds from the Hugoton sale will be added to cash on Riviera’s balance sheet, use of which will be determined by the board and management at a later time, the company release said.

The transaction will have an effective date of July 1. Riviera expects it to close in fourth-quarter 2019, subject to completion of customary title and environmental due diligence, as well as other closing conditions.

CIBC Griffis & Small was financial adviser to Riviera during the transaction and Kirkland & Ellis LLP provided legal counsel.