QEP Resources, Inc. (NYSE:QEP) is a leading independent natural gas and crude oil exploration and production company focused in two major regions: the Northern Region (primarily the Rockies and the Williston Basin) and the Southern Region (primarily Oklahoma, the Texas Panhandle, and Louisiana) of the United States.
In a company update on January 30, 2014, QEP Resources announced the continuation of spinning off its midstream companies, the nomination of two new board members and a share repurchase program of $500 million. QEP is also pursuing the sale of non-core assets in the Midcontinent and expects the process to begin during the first half of 2014.
QEP Resources is scheduled to discuss its Q4’13 results in a conference call on February 26, 2014. The company will release its 2014 guidance along with the results, and attributes the later-than-usual timing to its recent numerous initiatives.
Midstream Separation
Since its spinoff from the regulated utility Questar Corporation in 2010, QEP Resources develops, gathers, compresses, treats, processes and stores natural gas. The company is the majority owner of QEP Midstream Partners, LP (NYSE: QEPM), which recently went public this year, and owns 100% of the partnership’s general partner.
QEP announced the intention to sell its ownership in QEP Midstream Partners, L.P. (ticker: QEPM) on December 2, 2013. The company also plans on separating from QEP Field Services, a gas processing and gathering company located in the Rockies and Louisiana. Management said the spin-off will allow each company to compete more effectively in its respective markets. The proper SEC filing is currently being prepared and its placement will make the separation official.
QEP is in the process of recruiting executives to serve on the management team of its new standalone company.
QEP Strengthens Assets… In the Board Room
QEP announced the appointment of Robert F. Heinemann and Thomas C. O’Connor to its Board, effective immediately. Keith Rattie, a board member since 2010, is retiring from his position.
Heinemann will seek election for a three-year term at the company’s 2014 Annual Meeting. He previously served as the President and Chief Executive Officer of Berry Petroleum (ticker: BRY) for nine years. BRY was purchased by Linn Energy (ticker: LINE) in February 2013 for $4.3 billion. Its enterprise value was $375 million when Heinemann first assumed his role.
O’Connor served as Chairman and CEO of DCP Midstream, LLC (ticker: DPM) for six years. The company committed $5 billion to construction and development projects as its growth plan under his direction. He will seek election for a three-year term at the company’s 2015 Annual Meeting. OAG 360 notes that due to the timing of his potential election, O’Connor may be serving on the Board of one of QEP’s spin-offs, depending on its progression.
Switching Gears to Oil, Building Value through Sales and Stock Repurchases
QEP secured more than 26,500 net acres in the Permian Basin on December 9, 2013, for $950 million. An additional $1.4 billion was spent to obtain 27,600 net acres in the Williston Basin in April 2012. Total assets acquired from the two sales equaled net production of 17.2 MBOEPD and an estimated 5.2 MMBOE of net ultimate recovery. Management said the transactions have reflected the company’s new emphasis on crude oil and natural gas liquids production. In a conference on December 11, 2013, management said crude oil consisted of roughly 8% of 2011 production. Pro forma for the acquisitions, QEP expects oil and natural gas liquids to account for 30% of production. QEP predicts the liquids makeup to represent 50% of production by 2015.
OAG 360 covered the Permian acquisition in depth in a recent feature article.
QEP will also place non-core properties on the market in mid-February 2014. The company expects to complete the sales of the Granite Wash and “Cana” Woodford by July 2014, and information will be available in its 2014 guidance. The company currently serves as a non-operator in the play (23% average working interest) and holds approximately 73,000 net acres.
A stock repurchase program of up to $500 million of common shares has also been authorized. A definitive timetable of the buyback commencement has not been released, but the QEP Board said the program is dependent its financial position in addition to market conditions.
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