Newfield Sheds Texas Assets for $390M, More Than Expected

Newfield Exploration   (NFX)  said Wednesday it agreed to sell almost all of its assets in Texas for $390 million.

The Houston oil and gas explorer sold its unconventional assets in South Texas' Eagle Ford Shale to Tulsa, Okla.-based Protégé LLC, which is backed by EnCap Investments for an undisclosed sum. But it didn't disclose the buyer of its conventional natural gas assets in South and west Texas.

Together, the assets produce 12,700 barrels of oil equivalent per day, 35% of which is oil.

Newfield chairman and CEO Lee Boothby said in a statement that the company continues to refine its portfolio and focus its people and capital resources on assets with high returns and a deep inventory of drilling opportunities.

"Since 2009, we have generated about $3 billion in proceeds from asset sales as we transitioned to an oil company with a premium asset portfolio in onshore resource plays," he said. "Proceeds from the sale of our Texas assets will replenish our cash balance and position us for the timely acceleration of our Stack development [in Oklahoma] in the future."

Newfield said it expects to update its 2016 production guidance when it closes the transactions, which is expected this quarter.

Capital One Securities analyst Richard Tullis said the deal exceeded his expectations of $350 million, working out to $30,000 per flowing barrel of oil equivalent per day. He noted that the proceeds amount to only 4% of Newfield's enterprise value and the production makes up 8% of its volumes. "[The deal] should provide some additional liquidity and optionality as the company moves toward full field development in the Stack," he said.

Tullis has an overweight rating on the stock with a $50 price target.

Newfield's shares were up almost 7% to $44.41 on stronger-than-anticipated second quarter earnings due to lower costs, 15% higher production estimates for its Stack properties and higher overall production expectations for the year.

Stifel analyst Daniel Guffy increased his net asset value for the company by 8% to $51 per share, saying he continued to like Newfield's resource upside potential, strong balance sheet and emerging top-tier core asset base.

EnCap invested an undisclosed sum in Protégé in 2013 after backing two previous incarnations of the company. Protégé I sold most of its assets in Texas and Oklahoma to Forest Oil, EV Energy Partners and Newfield in 2008 and Protégé II shed its Marcellus/Utica assets in Appalachia and Ohio to Statoil at the end of 2012.

Newfield received financial advice on the asset sale from BMO Capital Markets' Jon Marinelli, Jason Martinez, Tod Benton, Geoff Roberts and Howard Barnwell and Scotia Waterous' Doug Reynolds, Robert Urquhart and Max van Adrichem.

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