ConocoPhillips’ Permian Asset Sale Is Part Of A Well-Received Strategic Plan

We have become so accustomed in recent years to seeing headlines about companies making major acquisitions to either move into the booming Permian Basin or expand their existing operations there that when we read a headline that says “ConocoPhillips Sells Permian Assets and Expands Elsewhere” (Houston Chronicle, April 3, 2018) it really grabs your attention.  In the face of a big independent like Pioneer Natural Resources announcing in February that it is staking its entire business on the Permian, or Concho Resources making the largest-ever acquisition of Permian assets, any news of a big Permian player selling acreage there seems counter-intuitive.

Of course, when you drill down into the Chronicle’sstory, you find that the news about ConocoPhillips (COP) isn’t so earth-shattering.  In fact, the disposition of acreage in the Permian was made up of several small packages of non-core properties that have thus far remained largely undeveloped.  Prior to these sales, COP owned 144,000 net acres of leasehold in the greater Permian region, and the vast majority of that acreage still remains in the company’s portfolio.  Far from leaving the Permian, the company is actually high-grading its asset base there , and using the proceeds from the sales to acquire acreage in other producing areas.

One of those areas is the liquids-rich natural gas play in Alberta and British Columbia called the Montney Field, where COP announced a 35,000 acre acquisition that brings its overall leasehold in that area to 140,000 acres.  Despite being a leaseholder in the Montney since 2009, COP had drilled just 29 appraisal wells there through the end of 2017, and plans to continue its resource appraisal activities throughout 2018.  This new acquisition is a clear indication that the company is seeing positive results there.

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