OXY Sells Bakken Assets To Lime Rock -- October 16, 2015; Sold At Huge Discount

Updates

October 19, 2015: what were they thinking? XOM (XTO) or COP (BR) could have added 300,000 Bakken acres to their portfolio for $1,700/acre. XOM has $4.34 billion in cash and $36.6 billion cash flow; COP has $3.81 billion in cash and $10.89 billion cash flow.

Later, 11:24 a.m. Central Time: wow, what were they (CLR, Whiting, Oasis, Slawson) thinking? Passing up an opportunity to buy 300,000 acres in North Dakota/Bakken for less than $2,000 / acre. Wow. What a sad commentary.  $500,000 vs an original sales price in the neighborhood of $3 billion. Wow.

Original Post

 

Finally, confirmed by Reuters:

Occidental Petroleum Corp's move to sell its North Dakota acreage likely removes a logjam that had impeded U.S. oilfield deals for much of the year, though the deal's price sets an unusually low bar for future deals and gives buyers the advantage over sellers.

Oxy is selling all of its roughly 300,000 acres in North Dakota's Bakken shale formation to a private equity fund in a deal valued around $500 million, sources familiar with the matter told Reuters.

The price is roughly one-sixth, though, of what Wall Street had expected Oxy to fetch for the assets as recently as last year.

Houston-based Oxy did not sell the North Dakota assets out of distress; indeed, it has $2.8 billion in cash in the bank.

Rather, the deal removes an operational distraction from managers focused elsewhere and helps the company achieve its goal of being cash-flow neutral. 

Still, for ConocoPhillips, Whiting Petroleum Corp , Oasis Petroleum Inc and other oil companies pursuing pipeline or oil acreage sales, Oxy has set the bar low.

I say "finally" because a reader passed this information on to me a couple of days ago, but I held off posting it until confirmed in mainstream media.

The linked article does not mention the buyer (unless I missed it) but the reader tells me the buyer was Lime Rock Resources. As of today (October 16, 2015), Lime Rock does not mention this on their web page. Update: a reader informs me that The Dickinson Press confirms that it was Lime Rock: link here.

Oxy executives had constantly bemoaned to Wall Street its high cost of drilling new wells in North Dakota, despite the fact that peers have consistently found ways to be more efficient.

While the high cost was partially a function of the company's geographic location, it also was born from a decision to spend more of the company's capital budget on operations in Texas, Oman and Colombia.

North Dakota "just can't compete with our Permian Basin (Texan) assets and we don't think it ever will, so we do want to monetize it," Vicki Hollub, Oxy's executive vice president and the named successor to Chazen, told analysts three months ago.

Lime Rock, which holds acreage in other U.S. shale plays, is already moving fast to cut costs by requiring all of Oxy's North Dakota employees to re-apply for their jobs, according to one of the sources.

I track Bakken operators here.