Local company to become a top operator in San Juan Basin after $169M acquisition

LOGOS Resources to close on second major acquisition in the basin; Hilcorp expects to grow operations in basin in 2018

Megan Petersen
Farmington Daily Times
Jay Paul McWilliams, president of LOGOS Resources, looks over a map, Tuesday, Dec. 12, 2017 during an inteview at Logos Resources, LLC in Farmington.
  • LOGOS will gain approximately 900 acres on 134,000 acres in San Juan Basin in deal to close by year's end.
  • Seller WPX Energy sold natural gas assets to focus on oil in San Juan, Permian and Williston basins.
  • Hilcorp operating five rigs in new assets; sees 'decades of opportunity' in San Juan Basin.

FARMINGTON — Farmington oil and gas operator LOGOS Resources II, LLC has made another major acquisition in the San Juan Basin, making it one of the top 5 largest companies operating in the basin, according to Logos Resources President Jay Paul McWilliams.

LOGOS will close on a 134,000-acre deal to purchase approximately 900 wells from Tulsa, Oklahoma-based WPX Energy, Inc. by the end of the year, McWilliams said. It follows another significant LOGOS acquisition of Energen assets in July 2016.

“We couldn’t be more excited,” McWilliams said on Dec. 12. “We have a great group of people here at the company that feel very confident that they’re going to be able to take over the asset. We’ll be picking up some new people from WPX that we’re very excited about, and then we’ll also be hiring some folks from the community that will be great additions to our organization as we’re going into 2018 to grow the company here in San Juan Basin. … This puts us from 550 wells to 1400. It’s a big leap.”

Jay Paul McWilliams, president of LOGOS Resources talks during an interview on Tuesday, Dec. 12, 2017 at Logos Resources, LLC in Farmington.

Kelly Swan, WPX Energy spokesman, said confidentiality stipulations within the sale agreement prevent him from identifying a purchaser, but that WPX is in the process of closing on the sale of its natural gas wells in the northern part of San Juan Basin. Swan said the $169 million sale should be closed by the end of the month.

WPX has shifted its focus to oil production since it “spun off as a separate company” from Williams, a natural gas processing and transportation company in Tulsa, in 2012, Swan said. Williams had been invested in the San Juan Basin’s natural gas assets since the 1980s, but WPX has been tailoring its business to “heavily shift toward oil.”

“All told, over past 4 years, we’ve conducted over $7 billion in transactions, both buying and selling,” Swan said on Dec. 12. “Essentially, we’ve sold natural gas-focused properties and acquired oil-focused properties, so what you’re seeing with this sale is a continuation of that reshaping of our business focus.”

Jay Paul McWilliams, president of LOGOS Resources LLC in Farmington, said some WPX employees will be hired as part of his firm's well acquisitions.

WPX still has approximately 150 oil wells in the southern part of the San Juan Basin that the company purchased in 2013. Swan said WPX has been “very pleased” with the productivity of their San Juan Basin oil wells, which were not included in the sale to LOGOS.

“This year, our local spend was about $150 million on new oil wells in San Juan Basin,” Swan said. “That will be less next year. In fact, we’re in the process of winding down our 2017 drilling program. We would love to have probably one rig operating at some point in the basin next year. Whether that’s spring or mid-year, that’s yet to be determined.”

WPX’s primary operations are in the Permian Basin in New Mexico and Texas, and it also operates in the Williston Basin of North Dakota, Swan said.

McWilliams said LOGOS has spent the past year working on acquiring land and wells in the San Juan Basin. The Farmington company made approximately $2 billion in offers on acquisitions, though McWilliams said in the industry in general, only about 10 percent of any oil and gas acquisition attempts are successful. He declined to disclose the cost of successful acquisitions made by LOGOS.

LOGOS has focused on bringing new technology to the San Juan Basin in the past few years and will continue to do so with its new wells, McWilliams said.

“San Juan Basin has notoriously been behind the technology curve (compared to) the rest of the industry,” McWilliams said. “That’s what brought me here in 2011 when I was working acquisitions in Houston and seeing all across the country these different old oil and gas basins being rejuvenated by technology, and it hadn’t really fully hit San Juan Basin yet, so that’s what led me to kind of go out on my own back in ’11, picking up assets here and putting new technology to work.”

LOGOS’ most recent acquisition is one in a series of sales of oil and gas assets in San Juan Basin over the past few years, McWilliams said.

Jay Paul McWilliams

“The San Juan Basin has almost entirely turned over and changed hands in assets,” McWilliams said. “It started, I think, when Elm Ridge sold, (then) Energen sold their position in two different pieces; you had ConocoPhillips sell their position to Hilcorp; you had Chevron selling their position, and now WPX and so with that, the majority of the assets have changed hands over that period of 12 to 24 months.”

Hilcorp closed on an acquisition deal with ConocoPhillips on July 31, 2017 that gave the Houston-based company approximately 14,000 wells on 1.3 million acres, making it “one of the largest producers of natural gas in the state of New Mexico,” according to Brian Wilbanks, Hilcorp’s senior vice-president of exploration and production for the Lower 48 — West region.

“Hilcorp has a long track record of developing assets acquired from major oil and gas producers,” Wilbanks said in a Nov. 28 email to The Daily Times. “While other companies have reduced their exposure to conventional assets, Hilcorp has become a leader in extending and improving the productive life of these assets through expertise, innovation and efficient operations. Our entry into the San Juan Basin is a natural extension of Hilcorp’s business model.”

San Juan Basin assets nearly double the Hilcorp’s barrel of oil equivalent production, and that the company hired a significant number of ConocoPhilips’ local employees during the transition. Wilbanks said Hilcorp had five workover rigs active in the basin in late November and that the company “expects that number to grow over the next year.”

“Our future plans hinge on our ability to understand the potential of the San Juan Basin, which we believe is full of opportunity,” Wilbanks said. “Over the long-term, we hope to grow our presence in the region in a safe and responsible manner. There are a number of variables that always affect future employment numbers, but, as we have done all across the country, we will always try and tap local talent when hiring in a specific region. Hilcorp sees decades of opportunity in the San Juan Basin.”

Megan Petersen covers business and education at The Daily Times. Reach her at 505-564-4621 or mpetersen@daily-times.com.