QEP Resources Inc. (NYSE: QEP) executed a series of divestments on May 6, knocking deals around like a highly sophisticated pinball machine, as three buyers purchased oil and gas properties in Midcontinent and Williston Basin.

Combined, the noncore assets will be sold for $807 million.

QEP had been marketing the Midcontinent assets for some time, and the Cana Woodford and Granite Wash properties sold for a combined $772 million. QEP said the Midcontinent assets hold an estimated 463 billion cubic feet equivalent of proved reserves as of Dec. 31. Current production is about 109 million cubic feet equivalent per day (MMcfe/d) of which about 37% is liquids.

Midcontinent assets ultimately end up with Devon Energy Corp. (NYSE: DVN), Cimarex Energy Co. (NYSE: XEC) and the expanding joint venture between George Solich’s FourPoint Energy LLC and affiliates of EnerVest Ltd.

Devon entered the mix in a deal with Cimarex, which swung a purchase and sale agreement to acquire Cana Woodford shale acreage in western Oklahoma for $497.4 million in cash. It simultaneously entered into an agreement to sell Devon a 50% interest in the assets at closing for $248.7 million.

“Based on various production reserve and EBITDA multiples, we had previously suggested a $750 million to $800 million valuation made sense,” said David Tameron, senior analyst, Wells Fargo Securities LLC. “Sounds like Street was around $600-800 million, so the purchase price was likely above most models. Further, the timing is also positive as the sale is expected to close before June 30.”

QEP also sold a noncore position in the western Williston Basin, known as “Fat Cat,” for $35 million and is expected to close in early June. A buyer has not been disclosed.

Tameron said that QEP has not had a rig on Fat Cat for more than two years and only had a small amount of nonoperated production.

“Makes sense and again, another positive,” Tameron said.

The company is continuing to market its remaining Midcontinent assets, primarily the South Central Oklahoma Oil Province (SCOOP) acreage and other Arkoma and Anadarko Basin assets, with current aggregate net production of about 21 MMcfe/d.

Spoils Of The Deal

The deal gives Devon 50,000 net acres and associated production primarily in the Cana Woodford Shale for $249 million in cash.

Devon’s portion of the acquisition, through its agreement with Cimarex, includes current production of about 5,800 barrels of oil equivalent per day (37% liquids) and proved reserves of about 23 million barrels of oil equivalent (MMboe) as of Jan. 1.

“Consistent with our philosophy to add scale and scope to our operations, this acquisition significantly bolsters our position in one of our liquids-rich core development areas,” said Dave Hager, Devon’s COO. “These assets directly overlap our existing core Cana position and expand our exposure to other western Oklahoma oil and gas plays.”

Cimarex’s share of the assets includes its estimate of proved developed reserves of approximately 140 Bcfe, 64% gas, as of Jan. 1. Current production is about 35 million cubic feet per day. The deal includes 50,000 net acres, including 30,000 net acres in the Cana Woodford area and oil-rich East Cana area. About 65% of the proved developed reserves are associated with properties in which Cimarex already owns a working interest.

“This acquisition is a perfect bolt-on for Cimarex as it consolidates working interest ownership in the Cana core infill development project area while adding exposure to other western Oklahoma oil and gas plays," said Tom Jorden, Cimarex’s chairman and CEO.

The acquisition will be funded with bank debt, Cimarex said.

FourPoint and EnerVest Ltd. bought into the Western Anadarko Basin for $275 million. The acquisition includes an interest in 642 producing wells with daily production of 32 MMcfe/d. The joint venture will have 47,000 net acres spanning 11 counties in western Oklahoma and the Texas panhandle.

The announcement follows a recent joint development agreement between FourPoint Energy and EnerVest to own, operate and develop oil and gas properties within an area of mutual interest (AMI) in the Western Anadarko Basin covering 14 counties in Texas and Oklahoma.

The companies have collectively pieced together more than 160,000 net acres in the AMI and will continue to advance their aggressive acquisition and development program throughout the region.

“The purchase of these assets fits our strategy of acquiring properties with multipay, liquids-rich opportunity sets. This acquisition is an excellent fit geographically with the properties recently purchased from Laredo Petroleum and SM Energy in our joint development area with EnerVest,” said Solich, president and CEO of FourPoint .

BMO Capital Markets served as financial advisor to QEP in the Midcontinent divestitures, and Vinson & Elkins LLP provided legal counsel. Holland & Hart LLP provided legal counsel for the Williston Basin divestiture.