WPX Energy Inc. (NYSE: WPX) said Dec. 31 that it signed an agreement to sell its San Juan Basin gathering system for about $309 million to a portfolio company of ISQ Global Infrastructure Fund, a fund managed by I Squared Capital.

WPX said it would receive $285 million in cash and an estimated $24 million in capital designated by ISQ to expand the system supporting WPX’s development in the Gallup oil play. The company said it was exploring ways to monetize the gathering system and its Piceance Basin assets.

The agreement pushed WPX well across the finish line in its efforts to divest assets following its $2.75 billion purchase of RKI Exploration & Production LLC’s Permian holdings in August.

The company targeted $400- to $500 million in divestments by the close of 2015 and the San Juan Basin midstream assets would increase divestitures to $575 million.

In November, WPX divested a North Dakota gathering system and Powder River Basin coalbed methane assets.

WPX held net debt of $3.2 billion as of Dec. 31, consisting of $3 billion in notes and the remainder primarily in revolver borrowings.

WPX is also shopping its Piceance Basin holdings, where it holds 200,000 acres and about 11,000 gross drilling locations.

“Unlocking/monetizing this asset is a key piece of the deleveraging plan for 2016,” said Brian Gamble, research director, Simmons & Co. International. “We continue to believe a Piceance deal is very possible even in the current gas price environment due to the long-term development nature of the asset.”

While the San Juan sale is an important step, the company needs to remain focused on improving its leverage to begin 2016, Gamble said.

Rick Muncrief, WPX’s president and CEO, said in a press release that the company will continue to prioritize debt reduction in 2016.

The deal is expected to close in first-quarter 2016. WPX said it will continue to operate the gathering system for at least two years with the opportunity to continue in ensuing years.

Adil Rahmathulla, partner at I Squared Capital, said the portfolio company will collaborate with WPX to build out the gathering system.

At closing, the gathering system will consist of more than 220 miles of oil-, gas- and water-gathering lines that WPX installed in conjunction with its drilling in the Gallup oil play, where the company made a discovery in 2013.

Over the past two years, WPX has rapidly grown its footprint in the Gallup play to about 100,000 acres, producing more than 10,000 barrels per day (bbl/d) in third-quarter 2015.

WPX also said that after the close of the third quarter, its production on a three-well Gallup pad delivered a 30-day IP rate of about 2,500 bbl/d of oil. The volume was an 85% increase compared to the company’s previous Gallup IP rates.

Changes to the Gallup drilling and completion design drove the improvement, WPX said.

JP Morgan Securities LLC was WPX’s exclusive financial adviser. Deutsche Bank Securities Inc. advised I Squared Capital on the transaction.

I Squared Capital is an independent global infrastructure investment manager focusing on energy, utilities and transport in North America, Europe and elsewhere. The firm has offices in New York, Houston, London, New Delhi, Hong Kong and Singapore.

Contact the author, Darren Barbee, at dbarbee@hartenergy.com.