Bakken Oil & Gas Assets Change Hands (BKH, QEP)

Black Hills Corp. (NYSE: BKH) has sold about 85% of the company’s assets in the Bakken and Three Forks shale plays in the Williston basin for approximately $243 million in cash. The effective date of the sale was July 1st and the deal is expected to close by September 30th.

The acquirer is a subsidiary of QEP Resources Inc. (NYSE: QEP), which also announced more asset acquisitions yesterday:

[QEP has entered into] two definitive agreements with multiple sellers to acquire significant crude oil development properties in the Williston Basin for an aggregate purchase price of approximately $1.38 billion.

The Black Hills assets were jointly owned with Helis Oil & Gas, among others, and included 28,000 net lease acres. QEP did not provide any details on how it spent the remaining $1.143 billion, but the company did say that it acquired 118,000 net acres in the Williston basin, including the Black Hills acreage. Other items of note from QEP’s announcement:

• Aggregate current net production approximately 10,500 barrels of oil equivalent per day (Boepd).
• Aggregate net proved and probable reserves of approximately 125 million barrels of oil equivalent (MMBoe), comprised of approximately 81% crude oil, 9% NGL and 10% natural gas.
• Above Williston Basin-average well estimated ultimate recoveries or EURs for both Bakken and Three Forks formations in the contiguous, operated acreage block.
• QEP estimates future net development capital for all acquired assets to be approximately $1.59 billion.

Black Hills affirmed its current guidance for full-year EPS of $1.90-$2.10 and estimated that it would report a one-time, pre-tax gain of $20-$40 million and will apply the rest of the proceeds to a reduction to its full-cost pool of assets. Black Hills expects to reduce its full-cost pool for the rest of this year by $1.30-$1.45 per thousand cubic feet.

QEP raised its adjusted EBITDA guidance for the year from $1.35-$1.4 billion to $1.4-$1.45 billion and forecast production to rise from 305-310 billion cubic feet equivalent of natural gas to a new range of 310-315 billion cubic feet equivalent. The company also raised its capex estimate from $1.45-$1.5 billion to $1.5-$1.55 billion.

Investors like both ends of this deal. Black Hills stock is up about 7.5% at $33.32 in a 52-week range of $28.63-$35.82. Shares of QEP are also up — by 5% — at $28.55 in a 52-week range of $23.56-$38.44.

Paul Ausick