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Abraxas Petroleum sheds conventional oil fields to refocus on fracking


Written by Rye Druzin

Click HERE to Read the Article by the Publisher.

Local oil company Abraxas Petroleum is offloading 14,000 acres, including a field that’s producing conventional oil and gas, as the company shifts its focus on shale plays in Texas and North Dakota.

“What we’re doing now is focusing more now on unconventional oil and gas in South Texas, the Bakken (North Dakota), and the Permian Basin,” Chief Financial Officer Geoffrey King said.

Proceeds from the sales will be used to pay down the company’s revolving credit facility, which King said is currently using $101 million of the $130 million credit line. Paris-based Societe Generale, the company’s main creditor, is reducing the credit cap to $120 million on Oct. 1, he said.

Abraxas is selling its 2,000-acre Portilla field and surface ranch in San Patricio County for $13 million. King would not confirm the buyer, but an SEC filing showed it to be Frostwood Energy, LLC, a Houston-based oil and gas company with capital backing from Denver-based SFC Energy Partners.

King described the Portilla field as “conventional,” and said that it does not fit into the company’s continuing consolidation and move to unconventional fields.

Traditional oil and gas fields that can be easily drilled are considered conventional. Shale fields, which need to use hydraulic fracturing to extract the minerals, are considered unconventional. Hydraulic fracturing can drill horizontally to reach hard-to-get fossil fuels. In fracking, a combination of water, chemicals and sand are blasted into the soil to break up the shale rock and release the oil and gas.

“If you look over the past four years ago, we have been focusing on the Bakken primarily and the Eagle Ford. If you go way back, in 2012, we were in ten states, in Canada, we had assets everywhere,” King said.

Abraxas recently completed six wells in the Bakken shale field in North Dakota, each of which are producing an average of 861 barrels of oil a day, and 1.6 billion cubic feet of natural gas.

In Pecos County Abraxas is selling another 12,000 acre ranch along with half of its mineral rights for $6.7 million. Abraxas will maintain ownership of the remaining mineral rights.

King said Abraxas has a single operating rig in the Permian Basin that’s drilling a single well in the Wolfcamp and is committed to drilling a second well. Another well has been drilled and completed in the Austin Chalk, but results have not come back yet.

The company has an idled rig in the Bakken shale, and King said that oil prices would need to rise above $55 a barrel before the company resumed drilling there.

The drilling in the Permian, Austin Chalk and the completion of the Bakken wells was paid for by $27.5 million raised in a stock offering in May, according to King.

Oil prices for West Texas Intermediate, the American benchmark, are hovering around $45 a barrel. Prices hit a peak for the year in June at $51 a barrel before falling to $40 a barrel at the beginning of August, according to data from Bloomberg.

Tags: oil, gas, natural gas, energy, petroleum

Written by Rye Druzin

Click HERE to Read the Article by the Publisher.