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WPX Energy to Buy Delaware Basin-Based Felix Energy for $2.5B

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WPX Energy announced that it intends to acquire Delaware Basin-based Felix Energy for $2.5 billion. The purchase consideration comprises $900 million in cash and $1.6 billion in WPX Energy shares. This acquisition is in sync with the company’s intention to further increase oil production.

Felix Energy has nearly 1,500 gross undeveloped locations in the eastern portion of the basin, with expected production of around 60 thousand barrels of oil equivalent per day. Out of the total production, 70% will be oil. The parties anticipate closing the transaction early in second-quarter 2020.

WPX Energy’s Delaware Assets

At present, WPX Energy has 131,000 net surface acres holdings in the Delaware Basin. Felix Energy has 58,500 net acres in an over-pressured, oily portion of the basin with six productive benches. This acquisition will strengthen WPX Energy’s position in the Delaware basin.

WPX Energy's oil production from the Delaware Basin improved 28% year over year in third-quarter 2019.  In addition, the company is using new technology in the basin, which is lowering operating costs and contributing to margin improvement.

Other Benefits From the Acquisition

After the closure of this acquisition in 2020, WPX Energy expects to further increase cash flow, earnings per share, free cash flow, return on capital employed and cash margins. Management will use this opportunity to increase the value of its shareholders through share buybacks and maintaining the annual dividend.

Price Performance

Shares of WPX Energy have outperformed its industry in the past six months.



Zacks Rank & Key Picks

WPX Energy currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry are Ring Energy Inc. (REI - Free Report) , CNX Resources Corporation (CNX - Free Report) and Evolution Petroleum Corporation (EPM - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ring Energy and CNX Resources reported average positive earnings surprise of 86.9% and 34.8%, respectively, in the last four quarters while Evolution Petroleum delivered average positive surprise of 12.5% in the last two quarters.

Ring Energy and CNX Resources’ Zacks Consensus Estimate for 2019 earnings has moved up 5.4% and 19%, respectively, in the past 60 days. Evolution Petroleum’s Zacks Consensus Estimate for fiscal 2020 earnings has moved up 7.1% in the past 60 days.
 
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