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WPX Energy (WPX) Sells Midstream Assets, to Lower Debts

Zacks Equity Research

WPX Energy Inc. WPX recently announced that its subsidiary and joint venture partner in Oryx II pipeline have completed the sale of the project. The agreement to sell its 25% in the pipeline was signed post Mar 31, 2019. The company intends to utilize the net proceeds of $350 million to lower dues in its credit facility.

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

Proceeds to Manage Debts & Buy Assets

WPX Energy is utilizing the proceeds from non-core asset sale to lower its outstanding debts and invest in new lucrative assets. The current debt to capital ratio of the company stands at 36.77%, which is better than its industry’s average of 37.91%. WPX Energy has been managing its debt levels quite efficiently and lowering the same.  

At the end of 2018, due to decline in debt compared with 2017 end level, the company had to pay $163 million in interest expenses, which reflected a 13% fall year over year. The same trend could be noticed at the end of first-quarter 2019 as well, with interest expenses dropping 11% year over year.

During the first quarter, the company used $100 million of its non-core asset sale proceeds to purchase nearly 14,000 surface acres within its Stateline operations. The acquired asset is expected to provide returns through speed of development, facilitating longer laterals, and revenues associated with infrastructure like roads, water and electricity.

Focus on Oil
 
WPX Energy has gradually transformed itself from a natural gas focused company to a liquid focused company. At present, nearly 78% production of the company is liquid and the rest is natural gas. It was simply the opposite five years ago.  This transformation is a result of execution of the company’s plan to produce more liquids. Oil production from Delaware and Williston Basins improved 31% and 62% year over year, respectively, in the first quarter of 2019.

Ongoing investments in WPX Energy’s core assets in the Delaware and Williston basins will help it to enhance production and build reserves. The company, which has plans to invest $1,100-$1,275 million in 2019, expects oil production to improve 20% year over year during the year.

U.S. Oil Production on the Rise

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”), majority of the oil production growth will come from the Permian region of Texas and New Mexico.

Per EIA, courtesy of increasing production from the shales, U.S. crude oil production will average 12.4 million barrels per day (b/d) in 2019 and 13.4 million b/d in 2020 compared with 10.9 million b/d in 2018.

To produce more from the resource rich Permian region Occidental Petroleum OXY has decided to acquire Anadarko Petroleum APC, outbidding the offer made by Chevron Corporation CVX to acquire the same.

Zacks Rank

WPX Energy currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price Movement

Shares of the company have lost narrower than its industry in the past 12 months.



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Chevron Corporation (CVX) : Free Stock Analysis Report
 
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