Hess Sells Utica Dry Gas Acreage For $924 Million, Exceeds $8 Billion In Divestments Since 2013
To acquire 74,000 acres of dry gas acreage within the Utica. (Expected to complete purchase of remaining acreage for $334 million by year-end)
Hess Corp. (NYSE: HES) entered into an agreement to sell about 74,000 acres of its dry gas acreage in the Utica shale to an undisclosed third party for $924 million, the company said Jan. 29.
Roughly two-thirds of the proceeds are expected at the end of the first quarter of 2014 and the balance will be received in the third quarter, the company said.
Including the Utica acreage sale, total proceeds from asset sales/divestitures are expected to surpass $10 billion. The next catalysts are the retail spinoff versus the sale decision and details regarding Bakken midstream EBITDA, which Hess plans to turn into a master limited partnership (MLP) in early 2015, said Sameer Uplenchwar, an analyst with Global Hunter Securites.
The sale of Utica dry gas acres at $12,000 per acre is in line with recent comps, Uplenchwar said.
Since 2013, Hess has divested $7.8 billion worth of assets in the Eagle Ford, United Kingdom and Indonesia.
Proceeds from the Utica sale will be used for additional share repurchases since they are excess of those associated with the divestiture program announced by the company in March.
Hess will determine whether to seek an increase to its existing $4 billion share repurchase authorization, approved as part of its March announcement after a final decision is made either to spin or sell Hess Retail.
Out of the share repurchase, Hess has executed $1.54 billion in repurchases to date, said Roger Read, senior analyst with Wells Fargo Securities.
John B. Hess, Hess CEO, said the sale of its Utica dry gas acreage shows the company’s continued commitment to grow shareholder value through ongoing “portfolio reshaping.”
“While our wells in the dry gas portion of the Utica were highly productive, we concluded that the potential returns from such an investment, at current and projected natural gas prices, no longer justified retaining this acreage as a strategic part of our overall liquids-based asset portfolio,” Hess said.
As of Dec. 31, Hess had cash of $1.814 billion, total debt of $5.798 billion, and equity of $25.122 billion. The net debt-to-capital ratio stood at 12%.
Latham & Watkins LLP advised Hess on the transaction, with a Houston-based oil and gas transactional team led by partner Robin Fredrickson with associates Yvette Schultz, Patricia Hammond and Jim Cole.