A local petroleum producer active in Kern County has negotiated the sale of all its California oil and gas assets to a local competitor in a deal valued in the hundreds of millions of dollars.
Houston-based Seneca Resources Co. LLC announced in an earnings release Thursday that it agreed on Sunday to sell the properties to Denver-based Sentinel Peak Resources California LLC for $280 million to $310 million, depending on future oil prices, effective April 1. The deal is expected to close June 30.
Seneca, part of New York-based National Fuel Gas Co., attributed the timing to strong commodity prices and the continuing growth of its Appalachian operations.
Although the size of the assets being sold was not directly stated in the release, the company indicated it produces about 6,100 barrels per day of oil in California. It also has said that, as of the end of September, its total proved reserves in the state totaled 21.5 million barrels of heavy oil in Central California, including in the Coalinga, Lost Hills and Taft areas.
Local observers were divided on the sale’s wisdom at a time of oil prices topping $100 per barrel and Sacramento’s continuing pressure on in-state production.
Bakersfield oilman Ken Hunter characterized the price as low at a time of relatively high crude prices.
“Not many out-of-state buyers out there (are) looking to buy into the California oil business due to the negative regulatory environment,” Hunter said by email Friday.
But local oil producer David Hartley called the price “expensive in my book.”
“We would rather drill at costs that high,” he said, adding that because of California’s stated intention of phasing out oil production, “you don’t have any runway” to make enough money in the long term to recoup the purchase price.
Sentinel President and CEO Michael Duginski said in a statement Friday the purchase will help the company provide energy users with safe and reliable energy resources.
“This transaction furthers Sentinel Peak’s ability to provide Californians with critical energy resources in a safe and reliable way consistent with Sentinel Peak’s longstanding environmental stewardship and sustainability focus,” Duginski stated.
Seneca expanded into Kern in 1998 with the acquisition of three local oil producers, following by a fourth in 2009.