Noble Energy sells another large block of its holdings in Weld County to SRC

Noble Energy, Colorado’s No. 2 oil and gas producer, has sold another large block of its holdings near Greeley, inking a $568 million cash deal with SRC Energy on Wednesday.

The purchase could pave the way for Denver-based SRC to drill more than 1,700 locations in the Wattenberg Field.

SRC said it will purchase 30,200 net acres adjacent to and just south of its current holdings in Weld County, increasing its to- tal position to 90,000 mostly contiguous acres. In May 2016, SRC, then known as Synergy Resources, agreed to pay Noble $505 million for 33,100 acres near Greeley.

Producers are drilling horizontal laterals that can stretch two to three miles, necessitating larger blocks of contiguous holdings than in the days when they drilled straight down rather than out. That has contributed to several large land exchanges and sales in the D-J Basin, including a 100,000-acre swap between Noble and Anadarko Petroleum in 2013.

The purchase includes oil and gas production from wells that Noble doesn’t operate equivalent to 2,500 barrels a day as well as rights to the wells that Noble does operate and expects to sell in a separate transaction for $40 million.

Noble, which has built a large amount of infrastructure to support its operations in Weld County, will continue to provide oil gathering and water services to the wells in the acreage that it is selling.

“This transaction solidifies SRC’s position as a leading D-J Basin operator with a deep inventory of efficient, high-return development opportunities combined with a conservative balance sheet. The operating efficiencies that we have gained over the past few quarters will transfer smoothly to this new acreage,” SRC chairman and CEO Lynn Peterson said in a statement.

The company said it plans to start developing its new holdings once the deal closes by the end of the year.

To help pay for the purchase, SRC also announced Wednesday it would sell 35 million shares of its common stock, which were trading above $9 a share at the close. They dropped 7.5 percent in after-hours trading, probably on concerns the offering would dilute existing shareholders.

Gordon Douthat, a senior analyst with Wells Fargo Securities, said in a research note that he was surprised by Noble’s move to divest such highquality acreage, especially in light of how much the Houston company has already sold off this year.

But he added that Noble had indicated that it hadn’t planned to develop the acreage it sold to SRC for several more years and the cash would help the company pay down debt.

Noble still retains 335,000 acres in the D-J Basin after the sale and will have ample drilling locations in the Wells Ranch, Mustang and East Pony areas, he said.