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QEP back to black

US shale producer aims to boost production in the Permian

US shale producer QEP Resources has returned to profit in the second quarter of the year, after selling off non-core assets.

The company reported net income of $48.8 million for the second quarter, compared with a net loss of $336 million for the second quarter of last year.

Adjusted earnings before interest, tax, depreciation and amortisation (Ebitda) was $166.5 million compared with $282.6 million last year, primarily due to the Haynesville/Cotton Valley and Uinta basin divestitures, lower production in the Williston basin and lower oil prices, the company said.

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However, the return to profit was supported by a 13% increase in production in the Permian.

Oil and condensate production in the Permian basin was 3.3 million barrels in the quarter, an increase of 2% compared with the second quarter of 2018.

Oil production was 7.5 million barrels of oil equivalent, a decrease of 47% year-on-year, primarily the result of the loss of 5.6 million boe of equivalent production associated with the assets sold.

Capital investment was $169.9 million for the quarter, compared with $365.7 million year-on-year.

The decrease in capital expenditures was primarily related to decreased drilling and completion activity in the Permian basin and limited activity in the Williston basin, QEP said.

“We have increased annual production guidance for crude oil, natural gas and NGL, lowered capex guidance by $50 million and reduced G&A expense by 50% - over $30 million - compared with the first quarter,” chief executive Tim Cutt said.

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In February of last year, QEP revealed that it was aiming to become a purely Permian-focused player as it embarked on a plan to sell off all of its non-Permian assets. Since then, it has completed several sale deal, including selling all of its Haynesville natural gas and oil assets in north-west Louisiana.

During the second quarter, it also disposed of $37.6 million-worth of additional assets.

“Following a comprehensive review of strategic alternatives that began in February of this year, our board has determined that the best path to create superior value for our shareholders is to move forward as an independent company,” Cutt said.

“The board remains open to shareholder input and committed to all steps to maximise shareholder value, and has decided to add two new independent directors and form an operations committee to build on the progress we have made to-date, and continue to improve operational performance,” he added.

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