In the midst of exploration success in the Gulf of Mexico (GoM), W&T Offshore Inc. (NYSE: WTI) on Sept. 25 took aim at its balance sheet with an agreement to sell a noncore asset in the Permian Basin.

W&T said an undisclosed buyer agreed to purchase its ownership in overriding royalty interests in the Permian Basin for $56.8 million. The interests were retained by W&T from the sale of its Yellow Rose Field assets in the northern Midland Basin to Ajax Resources LLC in 2015, according to analysts with Capital One Securities Inc.

“The sale further improves W&T's balance sheet and liquidity position,” Capital One analysts said in a research note on Sept. 25. The firm now projects W&T’s net debt-to-EBITDA is down from previous estimates and year-end 2018 liquidity of about $288 million.

The transaction also follows Diamondback Energy Inc.’s (NASDAQ: FANG) agreements in August to acquire Ajax as well as Energen Corp. (NYSE: EGN) in acquisitions within the span of less than a week totaling more than $10 billion.

W&T expects to close its noncore asset sale by Oct. 1, subject to customary closing conditions and adjustments.

In the GoM, W&T said Sept. 25 it encountered 163 ft of net pay with the ST 320 A-2 well from the South Timbalier 311 platform in the Ewing Bank 910 Field.

W&T now expects to have the first well online using existing infrastructure by year-end 2018. In addition, the company plans to spud the next exploration well, ST 320 A-3, after completing the A-2 well.

Both of these wells in the Ewing Bank 910 Field are part of a drilling joint venture (JV) program established by W&T and private investors in 2018.

“We’re encouraged to see exploration success, but this well highlights the reduced revenue stream for W&T under its JV drilling program,” Capital One analysts said.

W&T will receive 11%-14% of net revenues for 5% of total capex compared to its original 36% working interest, the analysts noted.

Tracy Krohn, W&T’s chairman and CEO, said in a statement, “The divestiture of our noncore, nonoperated onshore asset will enhance our already strong cash position as we optimize our balance sheet for future growth. We are continuing to have excellent drilling success in the Gulf of Mexico and delivering solid results for our JV drilling program. The ST 320 A-2 well success further supports our plan to execute and bring forward our high-quality prospect inventory.”