WPX Energy announced that it has signed an agreement to sell its wholly owned subsidiary WPX Energy Rocky Mountain, LLC, to Terra Energy Partners LLC for $910 million. The parties expect to close the sale in the second quarter.
Additionally, Terra is assuming approximately $100 million in transportation obligations in exchange for more than $90 million of WPX’s natural gas hedge value. WPX will retain more than $110 million in additional hedge gains, which will be realized throughout the year.
The divestiture will greatly enhance WPX’s liquidity, significantly improve its capital efficiency and returns, and materially lower general and administrative expenses going forward.
The move solidifies WPX as a Permian-focused company and provides a more balanced commodity mix given the pro forma exposure to oil and natural gas.
WPX expects oil to comprise approximately half of its future production volumes, up from roughly 20 percent during 2015. On a per-barrel equivalent basis, WPX’s 2016 cash operating costs (LOE, GP&T and operating taxes) are not expected to change materially following the divestiture.
WPX has a variety of options for the Piceance proceeds, including leverage reduction, additional drilling, infrastructure investments such as expanding its Permian gathering system, and buying out of any retained transportation obligations, including obligations associated with Piceance operations.
On Wednesday the company also announced plans to close its Oklahoma City office by middle of the year, relocating about a third of the workers to Tulsa.
Approximately 33 of the 95 OKC employees have been offered relocation packages. Two employees were offered teh opportunity to relocate to New Mexico. Sixty OKC employees have received notice that their jobs are being eliminated.
The layoffs are part of a company effort to reduce costs and efficiencies as the move forward during this unsteady oil price environment.
Those employees losing jobs, approximately 60, will be offered severance packages based on years of service, cash payouts for healthcare, time off and incentive plan balances. Departing employees will also be offered outplacement services and assistance.
In the past 21 months, WPX has executed approximately $5.5 billion in transactions to re-shape the company, high grade its portfolio, add decades of drilling inventory and protect its financial position.