PDC Closes Permian Basin Asset Sale; Plans to Suspend Drilling In Marcellus Shale

Transaction Type
Sellers
Buyers
Announce Date
Post Date
Close Date
Estimated Price
184MM
Description

Acquired approximately 10,800 gross acres in Andrews, Ector and Midland counties, TX, targeting the Permian Basin with more than 170 identified Wolfberry drilling locations, gaining 1,100 BOE/d, 13 MMBOE proved.

Petroleum Development Corp. (Nasdaq:PETD) has closed on the sale of its remaining Permian Basin assets to Concho Resources Inc. (NYSE: CXO) for a total of approximately $184.4 million.

The acquisition adds approximately 10,800 gross (10,200 net) acres in Andrews, Ector and Midland counties, Texas. Closing is expected in the first quarter of 2012.

The deal also adds more than 170 identified Wolfberry drilling locations through 40-acre spacing. The assets represent estimated proved reserves of approximately 13 million barrels of oil equivalent (MMboe) as of November 1, 2011, and current net production of 1,100 barrels of oil equivalent per day (Boe/d). The transaction increases the company’s net acreage in the Wolfberry by 20% and raises Concho’s average working interest in the play to 54% from 50%.

Proceeds from the sale will be used to reduce outstanding borrowings on the company's revolving credit facility and provide liquidity to fund the company's 2012 capital budget. The company previously sold its non-core Permian assets in the fourth quarter of 2011 for $13.3 million, resulting in total proceeds from the sale of the Permian Basin assets of approximately $198 million.

PDC also reported the company's joint venture, PDC Mountaineer LLC, has elected to temporarily suspend drilling in the Marcellus Shale play due to the current depressed natural gas price environment. PDCM is currently drilling its third horizontal Marcellus well in 2012 and plans to drill one additional well prior to suspending drilling operations.

PDC's previously announced 2012 capital budget of $284 million will remain unchanged. The company plans to reallocate the $12 million PDCM equity contribution portion of the capital budget to liquid-rich projects in the Wattenberg Field. The company reconfirms its production guidance of 53 billion cubic feet equivalent for 2012.

BMO Capital Markets was financial advisor to Petroleum Development.