WPX Energy Accelerates 5-Year Vision with Opportunistic Transaction

WPX Energy (NYSE:WPX) is taking another significant step in its commitment to delivering shareholder value with the $2.5 billion purchase of Felix Energy, one of the highest quality Delaware Basin operators.

Felix has approximately 1,500 gross undeveloped locations in the eastern portion of the basin, with expected production of approximately 60 MBoe/d (70% oil) at the time of anticipated closing.

WPX plans to implement a dividend post-closing, targeting approximately $0.10 per share on an annualized basis at initiation.

The acquisition and dividend program follow other steps WPX took in 2019 to enhance its value proposition, including reducing net debt, executing attractive midstream monetizations, launching a share buyback program and generating free cash flow.

The purchase price consists of $900 million cash, subject to closing adjustments, and $1.6 billion in WPX stock issued to the seller. WPX plans to fund the cash portion through issuance of $900 million of senior notes on an opportunistic basis. WPX also has obtained committed financing from Barclays in connection with the transaction and has full access to a $1.5 billion revolving credit facility.

The stock consideration comprises approximately 153 million WPX shares, which is based on the 10-day volume-weighted average price as of Dec. 13, 2019. The transaction is subject to customary closing conditions and approval by WPX shareholders.

The parties anticipate closing the transaction early in the second quarter of 2020. WPX’s board unanimously approved the transaction.

STRATEGIC RATIONALE & TRANSACTION BENEFITS

The acquisition is consistent with all of the tenets in WPX’s five-year vision for shareholders that the company introduced in November during its third-quarter report.

“Meeting the five-year targets we communicated is the absolute standard and benchmark for any investment we make,” said WPX Chairman and Chief Executive Officer Rick Muncrief.

“Now we can accomplish these objectives for shareholders more quickly and efficiently with the irrefutable benefits of the Felix transaction.

“Delivering on our plan ahead of schedule in a highly de-risked, leverage-neutral manner is consistent with our opportunistic approach,” Muncrief added.

On a pro forma basis, WPX expects to generate significant free cash flow in 2020 at $50 oil. Following the acquisition, cash flow per share, earnings per share, free cash flow per share, return on capital employed, and cash margins are all expected to increase.