Equinor has agreed to sell its Bakken Shale operation for $900 million, ending a decade long struggle to make money in the US shale oil business.
The buyer, Grayson Mill Energy, is acquiring wells producing around 48,000 BOE/D and 242,000 operated and non-operated acres in North Dakota and Montana.
The Norwegian oil company’s remaining shale holdings are in the gas producing Marcellus and Utica Shale formations in the eastern US, which it has been paring in recent years.
“We are taking action to improve the profitability of Equinor’s international oil and gas business,” said Al Cook, executive vice president of development and production international at Equinor. He added that Grayson Mill agreed to hire Equinor’s Bakken field team and a “significant number of the support teams.”
“By divesting our Bakken position, we are realizing proceeds that can be deployed towards more competitive assets in our portfolio, enabling us to deliver increased value creation for our shareholders,” said Anders Opedal, president and chief executive officer of Equinor.
Equinor is selling for a fraction of the $4.4 billion price it paid to enter the Bakken in 2011, when it bought Brigham Exploration at a premium during the early shale boom.
The Bakken sale completes is retreat from which began with the sale of its Eagle Ford Shale operation in 2019 for $325 to Repsol.
An internal audit by Equinor said it US onshore assets were responsible for $9.2 billion in asset impairments, according to a report by S&P Global Market Intelligence in January. The audit showed even its offshore US operations have been trouble for Equinor, with losses from all US operations “totaling $21.5 billion between 2007 and 2019.”
The audit said the losses in shale were rooted in overpaying to get into the Bakken rich shale three years before the outlook for that business was drastically changed by the 2014 oil price crash.
"The business case for acquiring Brigham was marginal and relied on upsides that were not realized," according to the audit. At the time of the deal the focus was on the production potential in a basin with so much oil in the ground.
At the time Helge Lund, for former president of the company, known as Statoil at the time of the Brigham deal, said that the “US unconventional plays hold a substantial resource base and represent an increasingly important part of future energy supplies. Statoil has step by step developed industrial capabilities through early entrance into Marcellus and Eagle Ford.”
Equinor was so high on it, it paid a 36% premium over the market value for Brigham’s shares.
The new buyer is backed by the investment fund Encap. The privately held Houston-based company said it is “committed to generating value through disciplined acquisitions and the application of innovative” technology to US onshore assets, which are not described.
It does say the Bakken is familiar territory to its chief executive officer, Eric Bayes, who was the general manager of the Williston office for Oasis Petroleum, before becoming vice president for completion and production for a company with more than 400,000 acres in the Bakken, which is in the Williston.
