UPDATE 2-Baytex to sell some Williston Basin assets to Magnum Hunter unit

Wed Apr 18, 2012 12:49pm EDT

* To sell assets to Bakken Hunter, unit of Magnum Hunter Resources

* Baytex reduces 2012 production outlook to 53,500-54,500 boe/d

* Magnum Hunter to increase capex spend in the region

* Magnum to fund buy, higher capex with loan

By Abhiram Nandakumar

April 18 (Reuters) - Baytex Energy Corp said its U.S. subsidiary has agreed to sell its non-operated interests in the Williston Basin in North Dakota to a unit of Magnum Hunter Resources for $311 million.

The assets being sold to Bakken Hunter had proved reserves of 12.4 million barrels of oil equivalent as of Dec. 31, and produce about 950 boe/d of Bakken light oil.

Baytex said the deal would lower its 2012 production by 500 barrels of oil equivalent per day (boe/d) to between 53,500 boe/d and 54,500 boe/d.

"The Assets are not a primary focus of our U.S. business unit as they are non-operated and generally have a lower average working interest than our remaining lands," the company said in a statement.

Baytex said its exploration and development budget remains at C$400 million ($405.04 million) and it still intends to drill 20 to 25 wells in North Dakota this year.

MorningStar analyst Robert Bellinski said selling the assets is a prudent move for Baytex.

"It's always good to prune your portfolio and make sure you're concentrating on your best assets. Baytex does a really good job at that," he said.

Baytex, which intends to use the proceeds from the sale to pay down debt, said the assets represented about 40 percent of its current U.S. production.

BMO Capital Markets-Canada analyst Gordon Tait said Baytex got a very good price for what were essentially non-core assets.

"They got $327,000 per flowing barrel of oil equivalent (boe) and Baytex is currently trading at $144,000 per flowing boe," he said.

A flowing barrel of oil equivalent corresponds to a production rate of 1 barrel of oil equivalent per day (boe/d).

MAGNUM TO RAISE CAPEX

Separately, Magnum Hunter said it will now spend $50 million more in capital expenditure in the Williston Basin area and expects to increase its upstream capital budget to about $225 million from $150 million.

Magnum said it has secured commitment letters for a new $450 million loan to fund the acquisition, pay off an existing loan and meet the higher capital expenditure target.

With the deal, Magnum Hunter's non-operated working interest in the acquired acreage will increase to 47.5 percent from 10 percent.

Baytex shares fell marginally to C$49.12 on Wednesday morning on the Toronto Stock Exchange, while Magnum Hunter fell 4.5 percent to $5.90 on the New York Stock Exchange.