Energen In Non-Core Assets' Purchase And Sale Agreements

U.S. energy holding company Energen Corp. (NYSE:EGN) announced that it has signed purchase and sale agreements (PSAs) for its non-core Delaware Basin and San Juan Basin assets. Per the agreement, the total gross proceeds after including all sales transactions with multiple, undisclosed buyers comes to $551.7 million. The transactions are expected to close by mid-August. The company expects to incur minimal taxes in association with these transactions.

Total production for all the properties to be divested averaged 9.0 thousand oil-equivalent barrels per day (mboepd) in Apr 2016, of which only 34% was oil. The majority of the production is in the San Juan Basin. In the Delaware Basin, the assets to be divested consist of unproved leasehold of approximately 55,000 net acres.

With the sale of its San Juan Basin assets, Energen would transition into a pure Permian Basin operator. The future focus would be on drilling and developing its high-quality acreage positions in the Midland and Delaware basins.

In the core Midland Basin, the company has approximately 68,500 net acres with 2,546 net identified locations in seven horizontal formations. After the closure of all the sales transactions, Energen will have approximately 42,200 net acres in the Delaware Basin in Texas and New Mexico with 954 net identified locations in four Wolfcamp shale formations.

Birmingham, AL-based Energen is an independent oil and gas exploration and production company engaged in the acquisition, exploration, and development of oil and gas in the U.S. The company also purchases, distributes and sells clean-burning, energy-efficient natural gas to commercial and residential customers.

We believe that Energen will be able to generate sufficient cash flows for its shareholders in the coming years backed by strong operating performance and good management.

Energen currently carries a Zacks Rank #3 (Hold). Investors can consider top-ranked stocks in the oil and gas sector such as CVR Refining, LP (NYSE:CVRR) , FutureFuel Corp. (NYSE:FF) and ReneSola Ltd. (NYSE:SOL) . Each of these stocks sports a Zacks Rank #1 (Strong Buy).