Energen Corp. has completed its transition to a pure-play Permian Basin explorer and has turned its focus to building an inventory of drilled but uncompleted (DUC) wells in the Delaware sub-basin.

The Birmingham, AL-based independent said late Monday it has completed or signed agreements worth $551.7 million with “multiple, undisclosed buyers” to sell noncore acreage in the Delaware and in the San Juan Basin. Some asset sales are to be completed by mid-August. Energen had put the assets on the market earlier this year (see Shale Daily, Feb. 16).

“The proceeds have exceeded our expectations and, as a result, our balance sheet is even stronger,” CEO James McManus said. “This position of financial strength allows us a great deal of flexibility to pursue additional capital investment opportunities in the Permian Basin in 2016 and 2017, including increased drilling and development and acquisitions.”

Net production associated with all the properties being sold, mostly in the San Juan, averaged 9,000 boe/d in April and is 66% weighted to natural gas and liquids. In the Delaware sub-basin, the 55,000 net acres sold or pending mostly was unproved leasehold. At the end of 2015, proved reserves associated with the San Juan and Delaware acreage being sold totaled 55 million boe. Total production in 2015 associated with the asset sales was 3,100 boe/d from the Delaware and 5,000 boe/d for San Juan.

With the sales agreements, Energen plans to focus on developing the Permian’s Midland and Delaware sub-basins, where it estimates it has a remaining net resource potential of 2.0 billion boe.

The capital budget for 2016 has been boosted to $450 million from $350-400 million “to further build up our inventory of DUCs at year end,” McManus said. “Up to $130 million will now target the Delaware Basin, where we plan to drill 17-19 net DUCs in the second half of 2016. In total, we now expect to end the year with approximately 54-58 net DUCs in the Permian Basin.”

Energen previously had planned to drill 37-50 net DUCs. In the Midland, Energen has 68,500 net acres with 2,546 net identified locations in seven horizontal formations. Once all of the transactions have been completed, Energen would have about 42,200 net acres in the Delaware, which straddles West Texas and Northern New Mexico, with 954 net identified locations in four Wolfcamp formations.

The company’s primary focus in the Delaware is 31,200 net acres in Loving and parts of Reeves and Ward counties in West Texas. On the core acreage position, the company has identified 675 net locations, including 148 net locations with at least 10,000 foot laterals and another 217 net locations with average lateral lengths of 7,500 feet.

“Not only does our balance sheet support the completion of these wells in 2017, but it also places us in an excellent financial position to undertake additional drilling and development activities in 2017,” McManus said.

Production-wise, Energen is guiding to a 2016 year-end midpoint of 53,600 boe/d, versus 53,100 boe/d in 2015. In the Midland, output is expected to increase to 34,200 boe/d, versus 31,600 boe/d in 2015. Delaware output at the midpoint is forecast to be 25,500 boe/d from 20,300 boe/d in 2015. From the Permian’s Central Basin Platform/other, Energen expects to produce 9,100 boe/d, down from 9,900 boe/d last year.

Energen was one of the producers that participated in a research project in the Permian that was undertaken by the U.S. Department of Energy’s National Energy Technology Laboratory (see Shale Daily, April 6). The project collected what may be the world’s most comprehensive hydraulic fracturing research dataset, offering a look at how induced underground fractures spread within horizontal wellbores.