WPX Energy (NYSE: WPX), a domestic energy producer with operations in the western United States, announced a definitive merger agreement to acquire privately held RKI Exploration & Production, LLC for $2.35 billion plus the assumption of $400 million of debt.
· Approximately 22,000 boe/d of existing production – more than half of which is oil
· Approximately 92,000 net acres in the core of the Permian’s Delaware Basin – approximately 98 percent of which is held by production
· More than 3,600 gross risked drilling locations across stacked pay intervals
· More than 375 miles of scalable gas gathering and water infrastructure
The acquisition metrics include approximately $1.1 billion for the existing production at $50,000 per flowing barrel, approximately $500 million for the established midstream infrastructure, which equates to an average of $12,500 per acre – or $1.15 billion – for the undeveloped locations.
“This is a transformative opportunity that fits perfectly with our strategy to increase our oil production and high-quality oil inventory,” said Rick Muncrief, WPX president and chief executive officer. “RKI’s asset scale and concentrated acreage position allows for efficient, low-cost, multi-decade development in a world-class oil play.
“For our shareholders, this further drives high-margin oil growth, accelerates our portfolio transition to more liquids, and solidifies our premier position in the western United States, which enjoys the advantages of established infrastructure and higher realized commodity prices.
“I want to personally acknowledge RKI’s Founder, President and CEO, Ronnie Irani, and his team for the successful company they’ve built and for recognizing our ability to take these assets to the next level. We’re excited to bring two companies together to create a new one that will have a deep oil inventory, massive natural gas optionality and long-term growth visibility,” Muncrief added.
The Permian Basin is characterized by numerous stacked reservoirs, extensive production history, long-lived reserves and high drilling success rates. All of RKI’s Permian properties are located in the Delaware Basin.
RKI also has operations in Wyoming’s Powder River Basin. Those assets are not included in WPX’s purchase. RKI will divest or transfer out its Powder River Basin assets before completing the merger with WPX.
WPX leadership has previous experience in the Permian Basin and a track record of maximizing large-scale oil developments to increase production, reserves and enterprise value while lowering expenses.
WPX plans to increase the rig count on the Permian assets from four to six by the end of this year.