After $27M asset sale, Earthstone turns focus to Midland

By Luke Geiver | November 21, 2017

Earthstone Energy Inc. is turning its entire unconventional oil and gas development focus to Texas. The company announced plans to sell roughly $27 million in assets located in the Williston Basin. Through the sale to an undisclosed buyer, Earthstone will be divesting of nearly 900 barrels of oil equivalent per day located in McKenzie County, North Dakota. The assets were all non-operated.

Earthstone has been navigating through the process of a merger and acreage acquisition in the Permian’s Midland Basin for the past year. “Over the past 18 months we have established a position in the Midland Basin that stands at approximately 27,000 net acres and approximately 7,000 Boepd. The divestiture of our Bakken assets allows us to continue focusing our human and capital resources on our highly economic assets in the Midland Basin,” said Robert Anderson, executive vice president for Earthstone.

According to Anderson, the lease operating expenses Earthstone is paying in the Midland Basin is less than those incurred by the company in the Bakken. The lower rate is linked to smaller fees and need for saltwater disposal services, he said. The company has access to inexpensive water disposal. While the Midland’s LOEs are in the $3/b range, the company’s Eagle Ford LOEs are roughly $6 to $7. And, in the Bakken, the prices are in the $10 to $12 range.

The ability to drill into multiple benches—or stacked payzones—is also a plus right now for Earthstone’s Midland position. While the company is currently targeting the Wolfcamp A and B zones, it is encouraged by other operators in the area that are having success in the Wolfcamp C zone. The company will consider drilling into the Wolfcamp C zone in 2018.

In the Eagle Ford, much of the drilling costs are going to be incurred by a drilling partner that is gaining a 50 percent working interest share in the wells in return for the funding.

For 2018, the company intends to run a single drilling rig, but the sale of its Bakken assets could bump the rig count up to two rigs.