Oil and gas giant ConocoPhillips has entered a definitive agreement to sell its interests in the San Juan Basin to an affiliate of Hilcorp Energy Company for up to $3bn.
Under the deal, Hilcorp Energy will pay $2.7bn in cash and the remaining $300m as contingent payment. The cash portion of the consideration is subject to customary closing adjustments.
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The contingent payment needs to be paid in six years, beginning 1 January 2018.
ConocoPhillips intends to use the proceeds received from this transaction for general corporate purposes.
ConocoPhillips chairman and chief executive officer Ryan Lance said: “This transaction significantly accelerates value from our San Juan Basin assets.
“Including our recently announced Canadian asset sales, we have line of sight to more than $16 billion of total considerations in 2017.
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By GlobalData“These transactions will materially reduce our exposure to North American gas and achieve an immediate step change improvement in our balance sheet and cash margins while accelerating our return of cash to shareholders.
“Our company will be more focused, far stronger financially, and well positioned to execute our disciplined, returns-focused value proposition.”
Last year, the San Juan Basin assets reported having produced 124,000 barrels of oil equivalent (boe) daily, of which nearly 80% was natural gas.
The operating activities provided nearly $0.2bn cash last year and the proved reserves were 0.6 billion boe at the end of 2016.
As of 31 December last year, the net book value of these assets was nearly $5.9bn, including approximately $2.8bn of step-up basis associated with the Burlington acquisition in 2006.
ConocoPhillips expects to record a non-cash impairment on the assets in the second quarter of this year.
The sale is subject to customary closing conditions, including regulatory approval, and is expected to close in the third quarter of this year.
