WPX Energy completes acquisition of Permian producer

Source:WPX Energy

WPX Energy has successfully closed the purchase of privately held RKI Exploration & Production, LLC.

WPX Energy (NYSE: WPX) announced today that it has successfully closed the purchase of privately held RKI Exploration & Production, LLC.

With the merger complete, WPX now has a substantial presence in the core of the Permian’s Delaware Basin that includes:

  • Approximately 22,000 boe/d of existing production – more than half of which is oil;
  • Approximately 92,000 net acres – approximately 98 percent of which is held by production;
  • More than 3,600 gross risked drilling locations across stacked pay intervals; and
  • More than 375 miles of scalable gas gathering and water infrastructure.

The Permian Basin is characterized by numerous stacked pay reservoirs, extensive production history, long-lived reserves and high drilling success rates. The 92,000 net acres represent more than 670,000 prospective net effective acres of stacked pay.

The newly acquired Permian assets have existing production from 10 of 12 prospective benches in a 9,000 foot hydrocarbon-charged stratigraphic column that includes the Wolfcamp, Bone Spring, Avalon and Delaware Sands intervals.

“This is a defining moment for our company,” said Rick Muncrief, WPX president and chief executive officer.

“This transaction drives our high-margin oil growth, accelerates our portfolio transition to more liquids, and solidifies our premier position in the western United States. These areas enjoy significant advantages of established infrastructure, which provides the opportunity for stronger realized commodity prices,” Muncrief added.

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.

Adding the Permian assets increases WPX’s total proved liquids reserves by 33 percent to 268 MMbbls as of year-end 2014. Total net resource potential for the Permian assets is estimated at more than 1.1 billion boe.

Throughout 2014 and 2015, WPX has been actively transforming and enhancing its portfolio, executing more than $4 billion in transactions including the purchase of RKI.

“We have accomplished a tremendous amount in the past year. Our ability to execute is recognized,” Muncrief said. “We will build on that track record by quickly delevering and reestablishing the strength of our balance sheet.”

WPX is targeting $400-$500 million in asset divestitures by the end of 2015 and another $400-$500 million in 2016, with the goal of achieving a net debt/EBITDAX ratio of 2x by year-end 2017 including underlying cash flow growth projections.

Additionally, WPX has amended its revolving credit facility, increasing its total commitments from $1.5 billion to $1.75 billion, favorably modifying existing financial covenants to enhance the company’s liquidity position going forward.

Portfolio rationalization opportunities include the monetization of midstream infrastructure, non-operated properties or other asset sales, along with evaluating creative options to unlock Piceance Basin value.

Barclays and Tudor, Pickering, Holt & Co. acted as financial advisors to WPX on the RKI transaction. Weil, Gotshal & Manges LLP served as legal advisor to WPX.


With the close of the transaction, WPX will inherit RKI’s hedge transactions which primarily consist of fixed price natural gas and crude oil swaps.

Post-closing for the balance of 2015, WPX has hedged approximately 31,000 barrels per day of domestic oil at a weighted average price of $85.14 per barrel, representing approximately 80 percent of anticipated volumes. WPX has hedged approximately 485,000 MMbtu/d of domestic natural gas at a weighted average price of $4.04 per MMbtu representing approximately 75 percent of anticipated volumes.

In 2016, WPX has hedged approximately 25,000 barrels per day of domestic oil at a weighted average price of $62.23 per barrel, representing at least 50 percent of anticipated volumes; and it has hedged approximately 412,000 MMbtu/d of domestic natural gas at a weighted average price of $3.66 per MMbtu, representing at least 70 percent of anticipated volumes.

“By incorporating RKI’s hedge transactions with WPX’s new and existing hedge positions, we are emphasizing our commitment to managing commodity risk and ensuring the certainty of our cash flows,” said Muncrief.


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