Integrated energy company Hess Corporation (HES - Analyst Report) has agreed to divest its Eagle Ford assets in South Texas to Houston-based independent Sanchez Energy Corporation (SN - Snapshot Report) for $265 million.
The all-cash deal, which is effective since Mar 1, covers around 43,000 acres in the Eagle Ford shale in Dimmit, Frio, LaSalle and Zavala Counties.
The deal comes amid shareholder concerns to focus its operations on a particular sector. The funds raised from the sale are expected to finance drilling and exploration programs and reduce overheads. Some of these strategic alternations are in sync with hedge fund Elliott Management Corp.’s demand.
On the other hand, the deal will enhance Sanchez’s yield by nearly two times to touch 4,500 barrels of oil equivalent a day (Boe/d) from its current yield of 3,800 Boe/d and add another 50 wells. The transaction will also boost Sanchez’s total proved reserves by 13.4 million Boe (MMBoe) and increase its proved developed reserves by around 6.6 MMBoe.
Hess is in the process of a transition from an integrated oil and gas company to a predominantly E&P entity, thereby shifting its growth approach from high-impact exploration to lower-risk unconventional and a smaller, more focused exploration portfolio. The company’s new strategy has consequently led to increased spending on Bakken as well as North Malay Basin, Valhall and Tubular Bells.
Hess is engaged in oil and gas exploration, production (E&P) and refining as well as marketing. The company’s E&P activities are concentrated in Algeria, Australia, Azerbaijan, Brazil, Denmark, Egypt, Equatorial Guinea, Gabon, Ghana, Indonesia, Libya, Malaysia, Norway, Russia, Thailand, the United Kingdom and the United States.
Hess carries a Zacks Rank #3, which is equivalent to a short-term Hold rating. However, the Zacks Ranked #1 stocks of Range Resources Corporation (RRC - Analyst Report) and EPL Oil & Gas, Inc. are expected to outperform the market over the next few months.