In a bid to leave the dry gas business behind, Carrizo Oil & Gas on Wednesday agreed to sell off horizontal drilling assets in the Barnett Shale, East Texas and the Marcellus Shale for $268 million.
The Houston exploration and production company is aiming to repay debt and redeploy capital into its Eagle Ford operations, a move to focus on more profitable oil in the booming South Texas play.
Carrizo said an affiliate of EnerVest Ltd. snapped up the Barnett Shale assets, but the company did not disclose the buyers of either the Marcellus Shale assets or the East Texas assets.
“It’s quite a lucrative play for us – oil prices are quite robust right now,” said Paul Boling, chief financial officer for Carrizo, in an interview. “It’s a strategy we believe the street will embrace.”
The company’s stock price dropped 2.5 percent in midday trading Wednesday to $34 per share.
Oil boom: Eagle Ford’s output rises 54 percent
Investors probably sent shares down because Carrizo officials had said previously that the Barnett Shale assets could bring about $300 million, said Brian Velie, an analyst at Capital One SouthCoast.
More broadly, though, the company can focus on better returns in the Eagle Ford Shale and the Niobrara Formation in Colorado, Velie said.
The company originally laid out its plan to divest its Barnett Shale assets in 2010, and has sold off chunks of its operations until Wednesday’s proposed deal, in which Carrizo signed off the last of its 9,000 net acres of dry gas assets in North Texas.
In a written statement, Houston investment banking firm Tudor Pickering Holt & Co. said Carrizo’s deal price fell below Wall Street expectations, but was in line with recent transactions.
Meanwhile, Carrizo pumped 12,239 barrels of oil per day in the Eagle Ford during the second quarter, a 61 percent boost from the same period last year. The company spent about $190 million in capital expenditures on its South Texas operations in the first half of 2013.
The deal for the Barnett Shale assets is expected to close in late October, while the sale of Marcellus assets could close in the fourth quarter, the company said.
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