Roughly 2,550 years ago, the Greek philosopher Heraclitus pretty well summed up, by happenstance, the current state of WPX Energy Inc. (NYSE: WPX).

“It is in changing that we find purpose,” Heraclitus wrote.

With newly acquired Permian Basin acreage WPX may see the same uncertainty faced by other E&Ps, but the leadership also knows it wants to sell—big.

WPX has set an ambitious goal of selling assets for up to $1 billion, said Thomas R. Driscoll, managing director at Barclays Capital Inc.

WPX is working to reduce the debt that came with its $2.75 billion purchase of RKI Exploration & Production LLC’s Permian assets. The purchase required the company to take on RKI’s debt and to finance the acquisition through borrowings and equity offerings.

While the target appears aggressive, Driscoll said it is achievable.

“We expect the company to get half way to its goal by year-end or very early 2016,” Driscoll said.

With some divestitures behind it, the company is preparing to sell off midstream assets in the San Juan Basin and some or all of its Piceance Basin assets in Colorado.

“The remaining target to sell an additional $500 million of assets in 2016 could be easily exceeded if WPX can attract an adequate sales price for the Piceance assets,” Driscoll said.

Otherwise, WPX may consider the sale of its Permian water system, Driscoll said.

New Goodbyes

In the past 15 months, WPX has been a prolific deal maker, with more than $4 billion of transactions under its belt.

To meet its divestiture goals, the company will need to keep the pace. WPX is actively marketing Mississippi Lime assets in Kansas, its San Juan gathering system and the Piceance.

“WPX is likely to announce the sale of the San Juan Basin water system by year-end for perhaps $300 million and perhaps the remaining Marcellus assets for about $20 million,” Driscoll said.

The San Juan Basin includes:

  • Gallup Oil, 400 locations,100,000 acres;
  • Natural gas potential; and
  • Established infrastructure.

WPX’s San Juan midstream assets generate about $30 million in EBITDA annually, said Rick Muncrief, president and CEO, during a Nov. 5 earnings call.

WPX is also keen to sell its Piceance assets, which have been supplanted by Permian, Bakken and Gallup Field assets, he said.

“The Piceance Basin is unlikely to attract significant capital within WPX’s portfolio today and the company is considering a sale,” Driscoll said. “We estimate that it could attract a sale price of $600-900 million based on our expectation that 2016 EBITDA could be in the $125-150 million range even at depressed prices.”

WPX executives said the Piceance generated about $175 million in EBITDA.

The Piceance Basin includes:

  • Vertical inventory of about 11,000 locations with infrastructure in place;
  • Niobrara/Mancos 15-20 trillion cubic feet equivalent stacked-pay resource potential; and
  • Stable cash flows.

“We’ve had overwhelming interest when we opened up discussions to accelerate value in the Piceance,” Muncrief said on Nov. 5. “We’ve had in excess of 20 management presentation to interested parties. There’s not many asset like this out there that are being talked about.”

The company is also marketing its Mississippi Lime assets in Kansas, including a leasehold position of 45,698 net acres.

Subsidiary WPX Energy Production LLC plans an exit from Kansas through the sale of its producing properties, according to EnergyNet, which has been retained to handle the sales.

WPX Energy, Mississippi Lime, Energy, on the market

The offering includes two horizontal Mississippi Lime wells, two saltwater disposal wells and water supply wells.

The properties had 8/8ths production averaging13 bbl/d of oil and 68 Mcf/d of gas for a six-month period. The six-month average net income was $11,630 per month.

The auction opens for bidding at 3:30 p.m. CST on Dec. 2 and closes at 3:30 p.m. CST on Dec. 9. For information contact Ethan House, EnergyNet vice president of business development, at 405-255-5444.

WPX’s subsidiary is also selling its leasehold position covering 47,415 gross (45,698 net) acres through a sealed bid offering.

The leasehold is concentrated in south central Kansas in Pratt, Reno and Stafford counties.

Highlights:

  • About 80% net revenue interest;
  • Majority of leases have two to three year extension clauses;
  • Horizontal Mississippi Lime potential; and
  • Area operators include Apollo Energies Inc., Deutsch Oil Co., L. D. Drilling Inc., Rama Operating, Co., Timberline Oil and Gas Corp. and Unit Petroleum Co.

All offers for the package are due at 4 p.m. CST on Dec. 10. For information contact EnergyNet’s House at 405-255-5444.

The Year In Deals

As of early November, WPX stood midway from its goal of up to $500 million in divestitures, primarily through the announced sale of its Williston Basin midstream assets.

Since January, WPX has made more than $3.2 billion in transactions, including the purchase of RKI’s Permian assets.

On Nov. 19, the company closed the sale of its Van Hook, N.D., gathering system for $185 million to a private equity fund managed by the Ares EIF Group, a subsidiary of Ares Management LP (NYSE: ARES).

The sale of the North Dakota asset consists of an oil, natural gas and water gathering system. Under the terms of the agreement, WPX will continue to operate the system, which supports its development in the Van Hook peninsula in the basin.

In September, WPX also completed an $80 million sale of its coalbed methane properties in Wyoming.

WPX, selected, deals, since, January, Hart Energy, Williston Basin, Powder River, Permian, Gallup, San Juan, Marcellus, shale

Darren Barbee can be reached at dbarbee@hartenergy.com, and Emily Moser can be reached at emoser@hartenergy.com.