US Oil Producers Selling Water Unites to Raise Cash

Some U.S. oil producers are trying to sell parts of their lucrative saltwater disposal businesses in a sign that cheap crude is already forcing cash-starved companies to sell assets so oil can keep flowing.

Many oil companies rely on outside contractors, which tend to be small, privately-held companies, to inject the briny byproduct of crude production hundreds or thousands feet deep into the earth, well below the water table.

But for producers which own such facilities, the high-margin business has served as a source of cost savings and steady revenue, factors that also make them appealing to yield-seeking investors in master limited partnerships (MLPs) and private equity funds.

SandRidge Energy Inc and Oasis Petroleum Inc are two publicly traded oil producers openly marketing their saltwater divisions. SandRidge is planning to raise cash by listing it as an MLP and Oasis is seeking at least a partial sale.

“The psychology of the market is pretty bad right now,” said Andrew Coleman, an energy analyst at Raymond James. “Any sale of these assets gives financial visibility without having to carry the cost of the asset on their books in what could be a rocky next few months.”

via Reuters

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza