Proceeds from the sale of the Eagle Ford Shale Midstream business by Pioneer Natural Resources and Reliance Holding USA Inc. will find their way to the Permian Basin.
Pioneer and Reliance, a subsidiary of India’s Reliance Industries, are selling the business to Enterprise Products Partners for $2.15 billion.
The two companies will receive $1.15 billion at closing, expected early in the third quarter, and $1 billion a year later. Pioneer’s share of the net proceeds is expected to be $500 million at closing and $500 million a year later. An additional $100 million will be realized from reduced transportation and processing fees associated with new downstream agreements resulting from the sale.
“We’re at the point where we had built out the facilities to the great effect that the project was done. We felt it was an asset we could sell at high value in the master limited partnership space,” said Tim Dove, Pioneer’s president and chief operating officer.
Company officials then felt the proceeds could be redeployed to activity in the Permian Basin, he said.
In announcing the sale, Scott Sheffield, Pioneer chairman and chief executive officer, said in a statement that the company currently operates 10 horizontal rigs in the Spraberry/Wolfcamp of the Permian Basin. He said the company will ramp up drilling activity on high-return Wolfcamp B and Wolfcamp A horizontal wells during the second half of the year and resume horizontal drilling in the Lower Spraberry Shale.
“Starting in July, we will add an average of two horizontal rigs per month in the northern Spraberry/Wolfcamp through the remainder of 2015 as long as the oil price outlook remains positive,” Sheffield said. “This additional drilling activity is expected to increase the company’s 2015 capital budget by approximately $350 million. The addition of these 12 rigs will have minimal impact on forecasted 2015 production growth of more than 10 percent due to multi-well pad drilling.