How Is WPX Energy Strategically Transforming Itself?



WPX Energy

On April 11, 2016, WPX Energy (WPX) presented at the IPAA (Independent Petroleum Association of America) OGIS (Oil and Gas Investment Symposium) in New York. In this part of the series, we’ll look at how WPX Energy is strategically transforming itself during this low commodity price environment.

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WPX Energy’s acquisitions

In July 2015, WPX Energy acquired RKI Exploration & Production for $2.4 billion in cash, plus the assumption of $400 million of debt. This was a strategically transformative acquisition for WPX Energy. It helped the company enter into the high-quality, low-cost Permian Basin.

WPX Energy’s divestitures

In order to support the RKI Exploration & Production acquisition and create a more focused portfolio, WPX Energy divested ~$1 billion of assets in 2015. In 2016, the company continued with its divestitures. In March 2016, it received ~$309 million from the sale of its San Juan gathering system. In the previous week, WPX closed the sale of its fully owned subsidiary WPX Energy Rocky Mountain in the Piceance Basin for ~$910 million.

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WPX Energy’s double benefit

Successful divestitures boosted WPX Energy’s pro forma liquidity to ~$1.6 billion from only ~$41 million at the end of February. It also created a more nimble and focused organization with operations in only three basins: the Permian Basin, the Williston Basin, and the San Juan Basin.

WPX Energy’s production mix

Due to the acquisition of crude oil–producing (USO) (OIL) assets and divestitures of natural gas–producing (UNG) (DGAZ) (UGAZ) assets, WPX Energy is now forecasting a huge ~84% increase in liquids production in its 2016 production mix. For 2016, WPX Energy expects its production mix to contain ~49% crude oil, ~12% natural gas liquids, and ~39% natural gas.

Other upstream companies from the S&P 500 (SPY) that have higher liquids percentage in their production mix are Energen (EGN), Occidental Petroleum (OXY), Murphy Oil (MUR), and Noble Energy (NBL). These companies contain ~78%, ~75%, ~72%, and ~47% liquids, respectively, in their production mix.

The volatility in oil prices also impacts ETFs and ETNs such as the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the Vanguard Energy ETF (VDE), and the VelocityShares 3x Long Crude Oil ETN (UWTI).

Next, let’s see how Carrizo Oil & Gas (CRZO) is positioned for the low crude oil and natural gas price environment.


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