QEP maintains ‘robust’ cash balance; $1.8 billion credit facility is undrawn; first bonds due next year

By Paul Deckelman

New York, Aug. 15 – QEP Resources, Inc. has maintained what its chief financial officer terms a “robust” cash balance, and ample liquidity.

In a presentation at Enercom Inc.’s 22nd annual edition of the Oil & Gas Conference on Tuesday in Denver, Richard J. Doleshek, who also serves as an executive vice president for QEP, an oil and natural gas exploration and production company, also based in Denver, noted that the company “sold our midstream business back in 2014 and put about $1 billion in cash on our balance sheet.”

He continued that “over the last couple of years, through a series of transactions, both equity offerings as well as divestitures, we’ve maintained a robust cash balance.”

At the end of the 2017 second quarter, the company’s cash position stood at $178.8 million, although that was down sequentially from the $338.4 million of cash and cash equivalents on the balance at the end of the first quarter on March 31, and down as well from the $443.8 million of cash that QEP had at the end of fiscal 2016 on Dec. 31 of that year. Stepped-up capital spending in the first and second quarters versus year-ago levels, and acquisition of several parcels of acreage and drilling rights accounted for much of the change in the cash position over the past six months.

Besides cash, Doleshek noted, “we’ve also got a $1.8 billion unsecured revolving credit facility that we haven’t used since we put it in place back in December of 2014.” The revolver matures in December of 2019.

With no revolver borrowings outstanding, the company’s capital structure at the end of the second quarter consisted solely of outstanding junk bond issues, according to its latest 10-Q filing with the Securities and Exchange Commission.

Its nearest maturity is due in April of 2018 – $134 million of 6.8% notes.

It also has $136 million of 6.8% notes due 2020, plus $625 million of 6 7/8% notes due 2021.

A little further out on the curve, QEP has $500 million of 5 3/8% notes due in 2022. Its largest outstanding maturity, $650 million of 5¼% notes, is due in 2023.

Its total second-quarter debt load of slightly more than $2 billion of bonds was about unchanged from Dec. 31.

During his presentation, Doleshek noted two big transactions the company has recently entered into.

On July 26, concurrently with its release of second-quarter results, QEP announced that it had agreed to acquire 13,800 net acres of crude oil and natural gas properties in the Permian Basin region in the western part of Texas, for an aggregate purchase price of $732 million.

Just two days earlier, on July 24, it had announced plans to sell all of its assets in the Pinedale energy field in southwestern Wyoming, for $740 million, as well as other Wyoming gas properties for an additional $35 million.

Taken together, the two transactions continue “our pivot towards a more oil-focused portfolio,” QEP’s announcement said.

Doleshek noted that when QEP began operations as a separate company after a spinoff seven years ago, it was largely natural gas-focused. Pro forma for completion of the two transactions, the company’s portfolio will be fairly evenly balanced between oil and natural gas, with a small component of natural gas liquids as well.

QEP said that it expects to fund the Permian Basin acquisition with proceeds from the Pinedale asset sale as well as cash on hand.

© 2015 Prospect News.
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