Ben Shaw hangs from an oil derrick outside of Williston, N.D.Gregory Bull
Baytex Energy Corp. said its U.S. subsidiary has agreed to sell its non-operated interests in the Williston Basin in North Dakota to a unit of Magnum Hunter Resources for $311-million.
The assets being sold to Bakken Hunter had proved reserves of 12.4 million barrels of oil equivalent as of Dec. 31, and produce about 950 barrels of oil equivalent a day (boe/d) of Bakken light oil.
Baytex said the deal would lower its 2012 production by 500 barrels of boe/d to between 53,500 and 54,500 boe/d.
"The assets are not a primary focus of our U.S. business unit as they are non-operated and generally have a lower average working interest than our remaining lands," the company said in a statement.
Baytex said its exploration and development budget remains at $400-million and it still intends to drill 20 to 25 wells in North Dakota this year.
MorningStar analyst Robert Bellinski said selling the assets is a prudent move for Baytex.
"It's always good to prune your portfolio and make sure you're concentrating on your best assets. Baytex does a really good job at that," he said.
Baytex, which intends to use the proceeds from the sale to pay down debt, said the assets represented about 40 per cent of its current U.S. production.
BMO Capital Markets-Canada analyst Gordon Tait said Baytex got a very good price for what were essentially non-core assets.
"They got $327,000 per flowing barrel of oil equivalent (boe) and Baytex is currently trading at $144,000 per flowing boe," he said.
A flowing barrel of oil equivalent corresponds to a production rate of one barrel of boe/d.
Separately, Magnum Hunter said it will now spend $50-million more in capital expenditure in the Williston Basin area and expects to increase its upstream capital budget to about $225-million from $150-million.
Magnum said it has secured commitment letters for a new $450-million loan to fund the acquisition, pay off an existing loan and meet the higher capital expenditure target.
With the deal, Magnum Hunter's non-operated working interest in the acquired acreage will increase to 47.5 per cent from 10 per cent.
Baytex shares fell marginally to $49.12 on Wednesday morning on the Toronto Stock Exchange, while Magnum Hunter fell 4.5 per cent to $5.90 (U.S.) on the New York Stock Exchange.