ExxonMobil Increases Bakken Holdings
Purchase of 196,000 net acres in Williston Basin in exchange for $1.6 billion and assets in Hartzog Draw field and Webster field.
ExxonMobil Corp. (NYSE: XOM) plans to buy the Bakken shale assets owned by a subsidiary of Denbury Resources Inc. (NYSE: DNR), which consist of 196,000 net acres in North Dakota and Montana. Those assets are expected to produce more than 15,000 barrels of oil equivalent (BOE) per day in the second half of 2012.
In exchange for its Bakken shale assets, Denbury will receive $1.6 billion in cash and acquire ExxonMobil’s interests in the Hartzog Draw field in Wyoming and Webster field in Texas, which currently produce about 3,600 net BOE per day of natural gas and liquids.
The agreement increases ExxonMobil’s holdings in the Bakken region by about 50 percent to nearly 600,000 acres, giving the company a significant presence in one of the major U.S. growth areas for onshore oil production.
“This agreement provides a strategic addition to ExxonMobil’s North American unconventional resource base,” said Andrew P. Swiger, senior vice president of Exxon Mobil Corporation. “ExxonMobil’s financial and technical strength will support continued development of America’s natural resources, which strengthens U.S. energy security while creating jobs and new government revenues for vital services.”
The Bakken shale acreage will be operated by ExxonMobil subsidiary XTO Energy, which is a leading U.S. oil and natural gas producer and has expertise in developing tight gas, shale gas, coal bed methane and unconventional oil resources. XTO has operations in all major U.S. producing regions.
Analysts generally applauded the transaction, saying it was good for the strategic interests of both sides.
Jason Wangler, an analyst with Wunderlich Securities Inc. said the Williston basin was never a strategic area for Denbury.
“The company seemingly never wanted to be in the Willisotn and the assets, while valuable, were not a core focus for Denbury. The lack of excitement by Denbury seemed to be refle ted in the stock price as it received minimal value for the assets and in somecases they could have been considered a distraction. By selling these assets, Denbury is able to remove the distraction and unlock value as it continues to focus on its core competency of tertiary oil recovery,” he said after the exchange was announced.
The exchange should strengthen Denbury’s balance sheet and add $1.1 billion net after taxes that it could use to repay its credit facility and repurchase its own shares. “We like the simplicity and strength of the DNR story going forward,” he reported.
Wunderlich calculated that ExxonMobil paid about $20 per BOE for proven reserves or $130,000 per flowing BOE for the assets. The growth of ExxonMobil into the Bakken could encourage additional majors to enter the region as it becomes better understood.