Approach Resources Inc. is selling its 50% interest in an oil pipeline system in the southern Midland Basin for proceeds of $108 million.

Approach and its partner in Wildcat Permian Services LLC entered into an agreement with affiliates of JP Energy Development LP under which JP Energy will acquire all of the equity interests in Wildcat for a purchase price of $210 million, subject to customary post-closing conditions. The transaction is expected to close late in the third quarter or early fourth quarter.

“Considering that [Approach’s] total investment in the partnership totaled $16 million, we view the transaction as a nice positive that was not expected by the Street,” Wells Fargo Securities analyst Gordon Douthat said in a note Thursday. “We believe proceeds will go to help fund the company’s development program and don’t expect any material change to the current transportation costs or access to takeaway capacity.”

Wildcat owns and operates an oil pipeline system consisting of about 50 miles of high-pressure steel pipeline in Crockett and Reagan counties, TX, with throughput capacity of 100,000 b/d, truck terminal and lease automatic custody transfer bay facilities, multiple receipt points and 40,000 bbl of crude oil storage. In connection with the acquisition of Wildcat, JP Energy and Approach will enter into a revised crude oil purchase agreement under which JP Energy will purchase and transport the Approach’s crude oil production from Crockett and Schleicher counties, TX.

“The sale of our oil pipeline provides a strong return on our initial investment, further strengthens our liquidity position and continues to provide firm crude oil takeaway from our core operating area,” said Approach CEO J. Ross Craft.

Approach is active in the Southern Midland Basin in West Texas, where it has drilled more than 595 wells since 2004. The company has focused on tight gas sands (Canyon Sands) and the Strawn and Ellenburger formations. Data from drilling vertical Canyon, Strawn and Ellenburger wells, combined with a geological and petrophysical study, led Approach to begin to develop the shallower Clearfork and Wolfcamp formations in late 2010, which the company calls Wolffork.

According to Approach’s SEC filings, the Permian oil pipeline sale is its first significant asset sale in recent years. After averaging less than $70 million per year between 2005 and 2010, Approach’s capex grew to $285 million in 2011, and $307 million in 2012. The $108 million Approach expects to receive from the Permian pipeline sale will help fund its expected $260 million in capital expenditures in 2013.