WPX Energy sells Van Hook gathering system

WPX Energy (NYSE: WPX) has agreed to sell a North Dakota gathering system for $185 million to a private equity fund managed by the Ares EIF Group, a subsidiary of Ares Management LP (NYSE: ARES).

The parties expect to close the transaction in approximately 60 days. The sale is part of WPX’s delevering plan targeting $400-$500 million in divestitures by the end of 2015. WPX also is targeting another $400–$500 million in asset sales in 2016. WPX is working to quickly reduce debt just two weeks after closing a transformative acquisition that added decades of drilling inventory in the core of the Permian’s Delaware Basin.

The sale of the North Dakota asset consists of an oil, natural gas, and water gathering system. WPX previously installed the infrastructure coinciding with its drilling program in the Williston Basin.

Under the terms of the agreement, WPX will continue to operate the system, which currently gathers 11,000 barrels per day of oil, 6,500 Mcf/d of natural gas, and 5,000 barrels per day of water, and can be expanded. The system supports WPX's development in the Van Hook peninsula area.

WPX produced an average of 22,600 barrels per day of oil in the Williston Basin during second-quarter 2015, up 20% from the same period a year ago.

Other portfolio rationalization opportunities include the monetization of additional midstream infrastructure, non-operated properties or other asset sales, along with evaluating creative options to unlock Piceance Basin value.

Global Hunter Securities analyst Patrick Rigamer, in a Monday morning note to investors, said, “WPX’s de-levering process is underway with the sale of the company’s Williston Basin Van Hook gathering system for $185MM. This asset was one of multiple midstream assets that WPX identified as potential sale candidates (Piceance water treatment and San Juan gathering systems being the others) as the company aims to divest $400MM-$500MM by year-end 2015 and again in 2016. Additional sales will be required to meet WPX’s target for 2015, but we view this sale as an important step in protecting the company’s balance sheet.”

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