(Reuters) - ConocoPhillips (COP.N) will sell some of its oilfields in Montana and North Dakota to Denbury Resources Inc (DNR.N) for $1.05 billion to focus instead on its promising shale oil and gas properties in the same region.
Oil and gas production in the Bakken region, spanning North Dakota, Montana and Canada, is expected to double by 2015 as producers use new technologies to unlock vast supplies in shale formations, a less risky means of producing crude.
Conoco will sell its Cedar Creek Anticline properties, the oldest and largest field in the southwestern Williston Basin, as part of an asset sale program that has helped the Houston-based company raise $12 billion since 2012.
"This is an attractive sales price for a relatively small, non-core producing asset and acreage located outside COP's assets in the Bakken formation," Barclays Capital analyst Paul Cheng wrote in a note.
Conoco expects to record after-tax net earnings benefit of about $120 million in the fourth quarter from the sale.
Top oil producers are focusing on relatively cheap and easy-to-access North American oilfields in regions such as Bakken to boost production in a sector where a vast amount of resources is tightly controlled by countries such as Brazil and Russia.
Conoco said Tuesday's sale did not include any of its assets in the Bakken formation, a region where companies are able to save costs by sinking multiple wells from single spots, a technique known as pad drilling.
The assets that Conoco is selling comprise 86,000 net acres in southwestern North Dakota and eastern Montana.
Net production from these assets averaged 13,000 barrels of oil equivalent per day (boe/d) through November 2012, the company said in a statement.
"Transaction metrics imply DNR paid about $25/bbl for proved reserves, or $95,000 per flowing boe, which is fair in our view," Baird analyst Michael Hall said in a note.
Plano, Texas-based Denbury said it would fund the purchase with cash received from its sale of assets in Bakken region to Exxon Mobil Corp (XOM.N) in September.
"(Conoco assets) currently produce almost as much oil equivalent as our divested Bakken area assets while generating substantially more free cash flow," Denbury Chief Executive Phil Rykhoek said in a separate statement.
Denbury said it expects the deal to boost 2013 average daily production by about 7,700 boe/d, if it closes at the end of the current quarter.
Denbury's shares rose about 2 percent to $17.23, while those of Conoco were flat at $58.49 on the New York Stock Exchange.
Additional reporting by Swetha Gopinath in Bangalore; Editing by Sriraj Kalluvila