US-based oil producer, ConocoPhillips has agreed to divest its stake in the San Juan Basin in the US state of New Mexico to a Hilcorp Energy affiliate for a price of up to $3bn.

ConocoPhillips will receive $2.7bn in cash while the transaction also includes a contingent payment of up to $300m.

The cash part of the proceeds is based on customary closing adjustments and the contingent payment on the other hand comes into effect from 1 Jan, 2018 with a six-year term.

ConocoPhillips plans to use the sale proceeds for meeting general corporate purposes with the divestiture expected to streamline its business and improve the company’s balance sheet.

According to ConocoPhillips chairman and CEO Ryan Lance, the transaction will considerably accelerate value from the San Juan Basin assets for ConocoPhillips, including the recently announced sale of the Canadian assets.

Adding that ConocoPhillips is looking at over $16bn of total consideration from asset sales this year, Lance said: “These transactions will materially reduce our exposure to North American gas and achieve an immediate step change improvement in our balance sheet and cash margins, while accelerating our return of cash to shareholders.

“Our company will be more focused, far stronger financially, and well positioned to execute our disciplined, returns-focused value proposition.”

The San Juan Basin assets saw production of 124 thousand barrels of oil equivalent per day in the full-year 2016. Out of this, natural gas made up about 80%.

Put together, the cash generated from the operations at the assets last year was around $200m, stated the independent oil producer.

In late March, ConocoPhillips inked a deal to sell major stakes in its Canadian oil and gas assets for $13.3bn to Cenovus Energy.

Image: San Juan Basin in New Mexico. Photo: courtesy of ConocoPhillips Company.