ConocoPhillips to sell assets to Hilcorp affiliate
The sale is expected to close sometime this summer
- Hilcorp San Juan, L.P. is the affiliate that will be acquiring the assets from ConocoPhillips
- Hilcorp says it strives to support communities by providing jobs, stimulating the economy and supporting causes
- The company says it will release Information on what the sale means to the current ConocoPhillips workforce at a later date
FARMINGTON – ConocoPhillips announced Thursday that it has entered into an agreement to sell its San Juan Basin assets to an affiliate of Hilcorp Energy Company for up to $3 billion.
"We are excited to move into the San Juan Basin and proud to work with ConocoPhillips on a deal that will enhance Hilcorp's presence in the southwestern United States," said Jeffrey D. Hildebrand, chairman and chief executive officer of Hilcorp, in a Thursday press release. "Hilcorp has a long and successful history of efficiently investing capital into similar assets to increase production."
ConocoPhillips, which has operated in the San Juan Basin for more than 50 years, announced last November that it would be selling off its assets in the basin, and said at that time that it had set a target of $5 to $8 billion from the asset sales.
"These transactions will materially reduce our exposure to North American gas and achieve an immediate step change improvement in our balance sheet and cash margins, while accelerating our return of cash to shareholders," said Ryan Lance, ConocoPhillips' chairman and chief executive officer, in a ConocoPhillips press release. "Our company will be more focused (and) far stronger financially ... "
As of December of last year, according to Thursday's press release, the net book value of ConocoPhillip's assets in the Basin was approximately $5.9 billion.
The transaction with Hilcorp is subject to specific conditions being satisfied, including regulatory approval, and the deal is expected to close in the third quarter of 2017.
Hilcorp, a Houston-based company, was founded in 1989 and is one of the largest privately-held independent oil and natural gas exploration and production companies in the United States, according to the Thursday press release. Hilcorp has operations located across the U.S., including the Gulf Coast of Texas and Louisiana, Wyoming, Northeast U.S., as well as the Cook Inlet and North Slope of Alaska.
Hilcorp San Juan, L.P. is the affiliate that will be acquiring the San Juan Basin assets from ConocoPhillips. It is a partnership between Hilcorp Energy Company and the Carlyle Group, a global alternative asset manager.
The release also states that Hilcorp's formula is to grow the company by first acquiring and developing conventional oil and gas assets, then using its expertise to optimize their performance.
The company said it strives to support the communities it operates in by providing jobs, stimulating the economy, and supporting local causes through scholarship and philanthropy programs, which it intends to implement within Farmington and other nearby communities.
That Hilcorp intends to get involved in the community and support local causes — as ConocoPhillips has done — comes as welcome news to several community leaders.
"We're hopeful the transition will be seamless," said San Juan County CEO Kim Carpenter. "We're anxious to welcome them to the county, and I hope we can establish some good partnerships. We're very pro-oil and gas, and we want them to know we're fully supportive of them."
Carpenter said that the information his office has received about Hilcorp has been positive.
"We are saddened that ConocoPhillips will no longer be in the community, but hope (Hilcorp) will fill the void and will be able to retain – or even take on – additional employees," he said. "From the portfolio we have of the company, they are interested in carrying forward what's already been done here, and we'll be interested to see if they'll be more aggressive with development and production in the Basin."
Four Corners Economic Development CEO Warren Unsicker said that knowing who will be taking over ConocoPhillips' assets takes a lot of the uncertainty out of the equation.
"Just knowing who we'll be working with is encouraging," he said. "I've heard that (Hilcorp) is a good community partner, and we'll be reaching out to them — as well as to ConocoPhillips — as they move forward."
Hilcorp spokesman Justin Furnace declined to provide more specifics such as the company's plans for current ConocoPhillips employees and what areas/resources in the Basin the company will be focusing on.
"Once we get closer to closing later this summer, we will provide a longer piece about us, and we want to sit down and introduce ourselves to the community," Furnace said.
ConocoPhillips spokeswoman Davy Kong declined to comment further, other than to say that once the sale is closed, ConocoPhillips will no longer have operations in the San Juan Basin but will still have operations in southeastern New Mexico.
ConocoPhillips employs about 500 people throughout the San Juan Basin and holds approximately 1.3 million net acres of leasehold in the area, according to information from its corporate office.
Leigh Black Irvin is the business editor for The Daily Times. She can be reached at 505-564-4621.