ConocoPhillips (COP) said Tuesday that, through its wholly-owned subsidiary, it has agreed to sell its properties in the Cedar Creek Anticline to Denbury Resources Inc. (DNR) for $1.05 billion in cash. The land, comprised of about 86,000 net acres, is located in southwestern North Dakota and eastern Montana.
In 2012, ConocoPhillips’ net production from the properties averaged 13,000 barrels of oil equivalent in the first 11 months of the year. Not included in the deal are any of ConocoPhillips’ assets in the Bakken Formation, where the company owns 626,000 net acres.
Denbury said that it estimates the proved conventional reserves associated with the properties were approximately 42 million barrels of oil equivalent of which approximately 95 percent was oil and 4 percent natural gas liquids and 91 percent was proved developed producing. Assuming the acquisition closes at the end of the first quarter of 2013, Denbury estimates that its full-year 2013 average daily production would increase by approximately 7,700 barrels of oil equivalent per day.
“The transaction will allow us to focus our investments in North Dakota and Montana on our significant Bakken unconventional position,” said Don Wallette, executive vice president, Commercial, Business Development and Corporate Planning at ConocoPhillips.
The transaction is expected to close by the end of March, subject to due diligence and other customary approvals. ConocoPhillips expects that sale will add $120 million to its fourth-quarter earnings.
Denbury plans to fund the transaction using a portion of the $1.3 billion it received from its Bakken sale and asset exchange with Exxon Mobil Corp. (XOM) last month. $1.05 billion from that deal was deposited in qualified trust accounts to facilitate potential future asset purchases that would qualify for a “like-kind” exchange treatment. Utilizing federal tax rules in that type of exchange for the acquisition from ConocoPhillips and the Rocky Mountain carbon dioxide reserves in the Exxon deal, Denbury is able to defer more than $400 million of the $500 million of cash taxes originally estimated on the Bakken transaction prior to completing the carbon dioxide reserves acquisition and agreeing to acquire the properties from ConocoPhillips.
Since the start of 2012, ConocoPhillips has divested about $11 billion-worth of assets, not including the sale reported today. In December, the company agreed to sell its Nigerian businesses to Oando Energy Resources (TSX: OER) for $1.79 billion in cash as part of its ongoing initiatives to consolidate its balance sheet and focus on less-risky exploration and production.
Shares of COP closed Monday at $58.47 and are up about 11 percent in the past 52 weeks. Shares of DNR closed yesterday at $16.88 and are off by about 5 percent in the past year.