Newfield Exploration Company
) has inked an agreement with energy explorer
W&T Offshore Inc.
) to sell all of its remaining 78 offshore assets in the Gulf of
Mexico (GoM) for $228 million.
NEWFIELD EXPL (NFX): Free Stock Analysis Report
W&T OFFSHORE (WTI): Free Stock Analysis
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The divestiture comprises 65 deep-water blocks, of which six are
currently producing and 10 additional shelf blocks, among which
four are producing. W&T will also acquire Newfield's overriding
royalty interest in three other deepwater blocks, of which two are
producing. Per the deal, all future asset retirement obligations
will also be assumed by W&T.
These properties span over approximately 432,700 gross acres, of
which around 312,000 gross acres are undeveloped. Around 91% of the
undeveloped acreage is deepwater.
The deal includes properties holding proved and probable reserves
of 7.7 million barrels of oil equivalent. In July, the average
daily output was around 8,350 barrels of oil equivalent, with oil
being 37%. W&T will secure operations over 90% of the
The deal is anticipated to close by October 1, and will likely be
financed with cash in hand and through its revolving credit
facility. Newfield has divested assets worth about $300 million in
the GoM through late 2011 and 2012, including the latest sale.
The divested deep-water blocks are located in the Garden Banks,
Mississippi Canyon and Viosca Knoll areas. These blocks, including
others in the Green Canyon and Atwater Valley region are expected
to hold exploration potential. On the other hand, Ship Shoal, West
Cameron, Vermillion, and West Delta hold the producing conventional
Newfield's main object behind departing from the GoM region is to
concentrate on its onshore oil-rich assets in the United States and
Southeast Asia. The company aims to increase its cash flow by
boosting oil and liquids growth from its core assets in these
regions. Since the beginning of 2012, company has secured about
$580 million from non-strategic asset sales, including the current
divestment. This goes to show the effort put in by Newfield to
increase value for its shareholders.
Newfield has a Zacks #3 Rank (short-term Hold rating). Longer term,
we maintain our Underperform recommendation.