* BreitBurn says deal to help double liquids output in 4th
* Whiting to invest in Permian basin, Rocky Mountains
* BreitBurn shares fall as much as 7 percent
By Swetha Gopinath
June 24 Whiting Petroleum Corp will sell
its stake in the Postle and North East Hardesty oil fields in
Oklahoma, along with related pipeline and processing assets, to
BreitBurn Energy Partners LP for $859.8 million, ending
market skepticism about its ability to monetize the asset.
The producing oil and gas assets are located in the
company's Texas County enhanced oil recovery projects, where
carbon dioxide is injected into wells to force up liquids.
BreitBurn said it expected the purchase of properties to
double its fourth-quarter liquids production from a year
earlier. The company expects the deal to immediately add to
distributable cash flow per unit.
"We're very excited to expand our geographic presence to
nine states by entering into the Oklahoma panhandle with high
quality oil fields and New Mexico with associated midstream
assets," BreitBurn Chief Executive Halbert Washburn said on a
The company said the assets, which produced 7,400 barrels of
oil equivalent in April, were estimated to have a reserve life
of about 13 years and would help balance some
development-focused acquisitions completed last year.
The company expects to fund the Whiting Petroleum deal with
borrowings under an amended credit facility. BreitBurn said it
had financing commitment to increase the borrowing base of its
credit facility to $1.5 billion.
BreitBurn shares fell as much as 7 percent to a four-month
low of $16.65 on the Nasdaq, before paring losses to trade down
"The reason for the stock selloff is worries that they may
have to equity-finance a portion of the deal, because it's going
to be quite a significant debt load," said Raymond James analyst
"They will be to able to debt-finance it for a while, but
they will need to bring their leverage ratios down."
The company will continue to monitor capital markets for
opportunities to reduce short-term debt and fund future growth,
Chief Financial Officer James Jackson said on the call.
"We have plenty of time baked in but we will look to
de-lever over time one way or another," he said.
Whiting will use the sale proceeds to invest in its core
properties in the Permian Basin in Texas and Rocky Mountain
regions, and to repay debt.
"The deal provides greater flexibility for Whiting to
accelerate operations while maintaining a strong balance sheet,"
said Howard Weil analyst Brian Corales, adding that the sale
price was in line with his expectations.
Whiting had been looking to bring in a partner to develop
the Postle oilfield, forming a royalty trust or selling it
That fact the transaction was a sale rather than a trust is
a positive, said SunTrust Robinson Humphrey analyst Ryan Oatman.
The sale includes gathering and processing facilities, oil
delivery pipeline, a 60 percent interest in a 120-mile (193
kilometer) CO2 transportation pipeline, CO2 supply contracts and
certain crude oil swaps, Whiting said on Monday.
BreitBurn said it was spending $30.2 million more to buy the
remaining interest in the CO2 transportation pipeline from a
third party and a non-operator interest in the Northeast
Hardesty field from another oil and gas company.
"The clear positive is the accretion from selling an asset
for 7 to 8 times cash flow from a company that is trading at
less than 4 times," Corales said.
The deal is expected to close by July 31 but Whiting will
continue to operate the assets until Oct. 31.
Whiting shares were down about 2 percent at $44.98 on the
New York Stock Exchange. The broader Dow Jones U.S. Exploration
and Production index was down about 2 percent.