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QEP Considers Divesting Pinedale Assets, Re-Emphasizing Permian, Williston Stakes

With a definite shift in emphasis to its Permian Basin assets, Denver-based QEP Resources Inc. executives signaled on Thursday that the company is preparing to divest its Pinedale assets in Wyoming to focus on the Williston and Permian basins.

"Earlier this week we engaged an advisor to assist us in divesting the Pinedale assets," said QEP CEO Chuck Stanley, during a 1Q2017 earnings conference call. The company reported a profit for the quarter after a substantial loss reported in the same quarter last year.

"We will start the [divestiture] process in the next week or so, and we anticipate closing a transaction in the second half of this year," Stanley said, while adding that he did not want to provide any more details or answer questions about the move. "We thought it was important to inform you of our ongoing streamlining of our asset portfolio."

Stanley said other assets could be monetized, although QEP has no specific plans at this time. In addition, he reiterated that the company is still pursuing swaps and purchases of acreage in the Permian with an emphasis on the north Midland subbasin.

Last year, QEP made a number of moves that emphasized a shift to an"oilier" portfolio, which emphasizes its Williston and Permian holdings.

In response to a question about the Haynesville Shale, Stanley said "there are no current plans to sell the asset, nothing actively ongoing, but we'll continue to evaluate and optimize our portfolio."

Stanley elaborated on the choice of Pinedale for sale rather than Haynesville, noting that Pinedale is QEP's "senior asset and there is a strong interest from buyers in PDP [proved developed producing]-heavy assets in the current market.

"We view Pinedale as a great asset; it has been the foundation of the company for a number of years and a platform for growth for us, but at this juncture, we're running out of inventory to continue to grow production. That is one of the primary drivers, along with market interest in PDP."

QEP owns 17,400 net acres in Pinedale, compared to its Williston holdings of 116,200 net acres; more than 76,000 net acres in the Permian; 110,700 in the Uinta, and 48,000 in Haynesville.

Longer term, QEP would prefer to monetize more assets rather than sell stock to buy additional acreage in the Permian or the Williston, Stanley said in response to another question. If Pinedale proceeds are not sufficient, the company is ready to sell some of its Haynesville assets.

Absent opportunities in either the Permian or the Williston, QEP plans to "be patient," Stanley said. "Despite popular perception to the contrary, there are a number of opportunities out there -- especially in the Permian -- that are not part of the current public processes, so we continue to look for those, and we have had success with bolt-ons. We sort of believe in 'eating the elephant a bite at a time' rather than one big transaction. There are multiple hundreds-of-millions-of-dollars [of] bolt-ons just around our existing footprint."

For 1Q2017, QEP reported net income of $76.9 million (32 cents/share), compared to a loss of $863.8 million (minus $4.55) for the year-ago quarter.

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