QEP Resources (QEP) Tops Q2 EPS by 8c, Announces $732M Acquisition of Properties in the Core of the Midland Basin

QEP Resources (NYSE: QEP) reported Q2 EPS of ($0.12), $0.08 better than the analyst estimate of ($0.20).

The Company also announced that its wholly owned subsidiary, QEP Energy Company, has entered into a definitive agreement to acquire crude oil and natural gas properties in the Permian Basin for an aggregate purchase price of $732 million, subject to customary purchase price adjustments (the "Acquisition").

2017 Permian Basin Acquisition

The Company's wholly owned subsidiary, QEP Energy Company, entered into a definitive agreement on July 26, 2017, to acquire crude oil and natural gas properties in the Permian Basin for an aggregate purchase price of $732 million, subject to customary purchase price adjustments. The Company expects to structure the Acquisition as a like-kind-exchange and to fund the Acquisition with the proceeds from the Pinedale Divestiture (discussed below) and cash on hand. The Acquisition is expected to close before the end of October 2017.

The Acquisition properties, located in the core of the northern Midland Basin, consist of approximately 13,800 net acres in Martin County, TX. The Company has identified over 730 potential horizontal drilling locations on the acreage over four horizons - Middle Spraberry, Spraberry Shale, Wolfcamp A and Wolfcamp B - with further upside potential from additional locations in emerging prospective zones and increased well density. The acreage footprint allows for nearly 60% of the identified potential horizontal drilling locations to be developed with 10,000 foot or longer laterals and its proximity to the Company's existing acreage provides opportunities to further optimize lateral length and share existing infrastructure. Nearly all of the Acquisition acreage is held by production to the Wolfcamp Formation or deeper, and the average working interest is 88%, subject to a 25% royalty burden. Current net production from the assets is approximately 635 Boed from 99 vertical wells, of which approximately 71% is crude oil. The Company estimates net proved reserves of approximately 44 MMBoe and total net recoverable resources of approximately 295 MMBoe on the Acquisition properties.

On a pro forma basis, assuming the closing of the acquisition, the Company's Permian Basin position will include approximately 43,000 net acres and approximately 1,900 potential horizontal drilling locations, all located within the core of the northern Midland Basin (excluding acreage in the southern Midland Basin and acreage on the Central Basin Platform).

The 2017 Permian Basin Acquisition presentation provides maps and further details on the Acquisition.

For earnings history and earnings-related data on QEP Resources (QEP) click here.

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