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WPX completes Felix acquisition
US
OKLAHOMA-BASED WPX Energy has completed its acquisition of privately held Felix Energy ahead of schedule after receiv- ing approval from shareholders last week. The $2.5bn acquisition was first announced in in December 2019 and expands WPX’s footprint in the Permian’s Delaware sub-basin. WPX also has operations in the Williston Basin.
Felix had production of 60,000 barrels of oil equivalent per day (boepd), around 70% of which was oil, and the transaction brings WPX’s output to 150,000 boepd.
“We remain absolutely convinced about the accretive nature of the transaction and the outstanding quality of these assets,” WPX’s chairman and CEO, Rick Muncrief, said. “They overlie a tremendous resource that clearly gives us the means for accelerating our ability to achieve our five-year targets for shareholders,” he added.
Felix’s financial sponsor, EnCap Investments, received roughly 153mn shares of WPX stock and a cash consideration of $900mn as part of the transaction.
When the acquisition was first announced, WPX said it would provide greater cash flow certainty, making it possible to continue its share buyback programme as well as begin making dividend payments to shareholders. However, WPX’s cash flow expectations were based on an assumption that oil would average $50 per barrel this year. Instead, market conditions have since worsened, with the coronavirus pandemic depressing global demand for oil and weigh- ing on crude prices, which subsequently fell to
levels not seen since 2016 following the failure of OPEC+ talks. West Texas Intermediate (WTI) was trading below $32 per barrel on March 12.
WPX has said it is watching the situation closely, according to the Oklahoman.
“Like everyone, we’re reassessing our 2020 capital programme based on current events, and as always, will take a thoughtful, measured response,”aspokesmanwasquotedbythenews- paper as saying.
This comes after a handful of other US com- panies announced immediate cuts to capital spending and drilling activity, including Mara- thon Oil, which also has operations in the Willis- ton and Delaware basins, among other regions.
Felix had roughly 1,500 gross undeveloped locations in the eastern portion of the Delaware Basin, spanning 58,500 net acres (237 square km). When the acquisition was first announced, WPX described Felix’s acreage as being located in an over-pressured, oil-rich portion of the basin with six productive benches. The com- pany said that around 25 additional wells are required for it to hold nearly all Wolfcamp and Third Bone Spring rights, with roughly half of those wells expected to be drilled in 2020. It remains to be seen whether this number will now be reduced in light of more challenging market conditions.
WPX said Felix’s recent multi-well pads with at least 12 months of cumulative gross produc- tion were averaging around 240,000 barrels of oil per well, with pad averages at 213,000-260,000 barrels of oil per well. Felix’s average lateral length was 9,200 feet (2,804 metres) per well.™
We remain
absolutely
convinced about
the accretive
nature of the
transaction and
the outstanding
quality of these
assets.
Rick Muncrief
Chairman and CEO WPX Energy
Week 10 12•March•2020 w w w . N E W S B A S E . c o m
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