Riviera Resources To Narrow Focus In $31 Million Hugoton Sale

Riviera Resources Inc. launched plans to divest Hugoton Basin assets on April 29 as the Houston-based company continues to simplify the multibasin portfolio it inherited from Linn Energy.

Riviera, an independent oil and gas company formed through a spinoff from Linn Energy last year, said it agreed to sell the assets located in southwest Kansas to an undisclosed buyer for a contract price of $31 million.

The Hugoton assets comprise 2,300 nonoperated wells throughout the basin with proved developed reserves of about 74 billion cubic feet equivalent. The proved developed PV-10 value of the assets is about $30 million, the company said.

Earlier this year, Riviera closed the sale of its Arkoma Basin position for $68 million, which the company used to pay off its debt. When asked by an analyst about future asset sales during the company earnings call in February, Riviera COO Dan Furbee said the company will continue to be opportunistic.

“When you look at the upstream assets, we’re in five different operating areas,” Furbee said according to a transcript of the call by Seeking Alpha. “I think that’s something that you’d like to kind of simplify and have a story that’s a little easier to understand.”

Furbee didn’t provide a timeline for any further asset sales the company might be targeting.

Through its spinoff from Linn in August 2018, Riviera added a portfolio of mature producing properties throughout the U.S. Additionally, the company took control of Blue Mountain Midstream, a midstream operator focused in the heart of the Merge play in central Oklahoma.

Riviera’s portfolio currently includes positions in the Northwest Stack play, East Texas, North Louisiana, Michigan/Illinois and the Uinta Basin as well as the Hugoton Basin. During fourth-quarter 2018, the company produced about 274 million cubic feet equivalent per day (MMcfe/d) net. The company’s assets have a roughly 10% base decline rate.

RELATED: Linn Spinoff Riviera Resources Sells Arkoma Basin Assets

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

Riviera’s wells in the Hugoton Basin primarily produce natural gas, NGL and helium from the Council Grove and Chase formations at depths ranging from 2,200 ft to 3,100 ft. The company produced roughly 130 MMcfe/d net from its Hugoton position in the fourth quarter of 2018.

The Hugoton production at its Jayhawk Plant, a cryogenic gas processing plant located in southwest Kansas with roughly 450 million cubic feet per day of processing capacity. Production from Riviera’s divested Hugoton properties will continue to be processed at the Jayhawk plant, the company said.

Riviera expects to close the sale in the second quarter of 2019. The transaction will have an effective date of March 1.

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