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WPX Energy Monetizes Midstream Assets Once Again for $350M

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WPX Energy Inc. (WPX - Free Report) announced that its subsidiary and joint venture partner in the Oryx II pipeline have signed agreements to sell the project. Per the contract, the company will sell its 25% interest in the Oryx II project for $350 million.

The Oryx II transaction is WPX Energy’s second midstream monetization this year. WPX Energy has already closed the previously announced sale of its 20% equity interest in Whitewater Midstream’s Agua Blanca natural gas pipeline system.

The decision to sell the midstream assets will generate nearly $550 million in proceeds for the company. Notably, it invested nearly $125 million in its equity positions in Oryx and Whitewater midstream systems, primarily in 2017 and 2018. Despite sale of interest in both the pipelines, WPX Energy will continue to be a shipper on both these pipelines.

The company can utilize the net proceeds to strengthen its balance sheet by repaying debts or buying new acreage in oil-rich reserves that will boost its future prospects.

Transformation of WPX Energy’s Holdings

WPX Energy’s management has decided to rationalize its portfolio, improve the existing cost structure, focus more on core areas and divest non-core assets.
 
WPX Energy’s current focus is on oil assets. At present, nearly 80% production of the company comprise liquid and the rest is natural gas, which was simply the opposite five years ago. This transformation is a result of execution of the company’s plan to produce more liquids.

WPX Energy expects total production guidance for 2019 in the range of 149-161 thousand barrels of oil equivalent per day (Mboe/d), out of which 63% is supposed to be oil. In 2018, the company produced 127.1 Mboe/d.

Rising Oil Production in the United States

Courtesy of increasing production from shale, oil production in the United States is rising consistently over the years. Notably, oil and gas operators are concentrating on onshore assets to produce oil and gas. Per U.S. Energy Information Administration (“EIA”), U.S. crude oil production will average 12.3 million barrels per day (b/d) in 2019 and 13.0 million b/d in 2020 compared with 10.9 million b/d in 2018. Most of the oil production growth will come from the Permian region of Texas and New Mexico, according to EIA.

Rising oil production will allow the United States to become a net exporter of oil by the end of next year. EIA forecasts that net imports will continue to fall to average of 1.0 million b/d in 2019 and average net export level of 0.1 million b/d in 2020. EIA forecasts that the United States will be a net exporter of crude oil and petroleum products by about 0.9 million b/d in fourth-quarter 2020.

Companies like Devon Energy (DVN - Free Report) , Occidental Petroleum (OXY - Free Report) and Apache Corporation (APA - Free Report) , among others, are more focused on developing U.S.-based assets to increase production.

Price Movement & Zacks Rank

WPX Energy currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of the company have outperformed its industry in the past three months.



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