Continental Resources has signed a definitive purchase and sale agreement with an undisclosed buyer to sell non-strategic properties in North Dakota and Montana for $222 million. The sale includes 68,000 net acres of leasehold primarily in western Williams County, North Dakota, and 12,000 net acres of leasehold in Roosevelt County, Montana. The sale also includes net production of approximately 2,800 barrels of oil equivalent (boe) per day. The agreement provides for customary closing conditions and adjustments.
Capital One Securities analyst Phillips Johnston put a price tag of approximately 1% of the company’s enterprise value with associated production representing approximately 1% of Continental’s total volumes.
“We estimate the properties generate approximately $30 million of annual EBITDA at our '17 price deck of $50/$3. Deal metrics thus include approximately $79K per flowing boe/d and approximately 7.5x EBITDA. After backing out value of production, we estimate implied undeveloped acreage value is approximately $800 - $1,300/acre, so not much value was placed on upside potential, which makes sense given the location outside of the play’s core,” Phillips continued in a Wednesday note.
This recent deal is the third sale of non-strategic assets this year, with total expected proceeds of more than $600 million.
In May 2016, the Oklahoma City, OK-based company announced the sale of approximately 132,000 net acres of leasehold in the Washakie Basin in Wyoming for $110 million. On August 3, 2016, Continental announced it had signed a definitive purchase and sale agreement with an undisclosed buyer to sell approximately 29,500 net acres of non-strategic leasehold in the eastern SCOOP play in Oklahoma for $281 million.
"Our guidance for the year has not changed. The combination of Continental's high quality drilling inventory, strong balance sheet and $560 million investment in drilled but uncompleted wells (DUCs) provides the company with a robust platform for high-value future growth," said Harold Hamm, chairman and CEO.
The $560 million investment includes both operated and non-operated DUCs, approximately 80% of which are in North Dakota.
Continental currently has approximately 215 gross operated DUCs in inventory, of which approximately 165 are in the Bakken. The company expects the total to grow to approximately 240 gross operated DUCs at year-end 2016, with approximately 190 in the Bakken. Continental Resources said its Bakken DUCs have an average estimated ultimate recovery (EUR) of 850,000 boe per well and can be completed at an average cost of between $3.0 million to $3.5 million per well.