Equinor sells its assets at U.S. Eagle Ford to Repsol for $325 million

OSLO (Reuters) - Norway’s Equinor agreed to sell its shale assets at the Eagle Ford shale formation in southwest Texas to Repsol for $325 million, the Norwegian oil and gas firm said on Thursday.

FILE PHOTO: A logo of Equinor, formerly known as Statoil, is seen at the company's headquarters in Fornebu, Norway May 21, 2018. REUTERS/Nerijus Adomaitis

The company holds 69,000 acres net (27,923 hectares) in the formation via a joint venture with Spanish Repsol, and its equity production from the Eagle Ford averaged 43,000 barrels of oil equivalents per day (boepd) or 2% of its total global output in 2018.

In addition, Equinor holds stakes in some midstream assets in the area.

Equinor entered the Eagle Ford through a 50-50 joint venture with Talisman Energy in 2010, increasing its stake to 63% in 2015 and taking operatorship of the whole asset in 2016.

Under Thursday’s agreement, Repsol will be the new operator and will have a 100% interest in the asset.

In 2017, Equinor took a $850 million impairment on the asset due to lower-than-expected output after its plan to tighten well-spacing to 200 feet from 500 feet backfired.

Shale producers aim to narrow gaps between wells to cover the formation more completely, but a too-narrow gap can result in wells draining the same part of a formation.

The main part of Equinor’s acreage in the Eagle Ford is also located in the areas with high or extremely high water stress, the company said in its annual report for 2018.

Shale producers inject large amounts of water mixed with sand and chemicals into wells to fracture shale rocks to release hydrocarbons.

Eagle Ford accounted for about 15% of its total shale oil and gas production in the United States in 2018. The company also produces hydrocarbons from Marcellus and Bakken formations.

In a separate agreement, Repsol will acquire a 20% non-operated interest in the Monument prospect that Equinor is drilling in the Northwest Walker Ridge area in the Gulf of Mexico, Equinor said.

Equinor plans to commence drilling this well before the end of the year.

Reporting by Lefteris Karagiannopoulos; Editing by Daniel Wallis