Tulsa’s WPX Energy reported a $121 million fourth quarter 2019 loss or $0.29 per share from its operations even after a 16 percent increase in oil volumes. It also intends to push forward with a $400 million repurchase of WPX shares.
The company said its total 2019 net income of $256 million was 70% higher than 2018 and despite lower oil prices, its adjusted EBITDAX for the year grew by 27%.
The company said the fourth quarter loss was driven by a $199 million net loss on derivatives primarily from forward mark-to-market losses on the company’s hedge book. For full-year 2019, WPX reported income of $258 million for the same measure, or income of $0.61 per share.
Excluding forward mark-to-market losses on derivatives and other items, WPX posted adjusted net income from continuing operations in fourth-quarter 2019 of $42 million, or income of $0.10 per share.
Adjusted EBITDAX was $1,369 million in 2019, including $366 million in the fourth quarter. Cash flow from operations, inclusive of hedge impact, was $1,257 million in 2019, including $351 million in the fourth quarter.
Free cash flow in the second half of the year was $101 million, including $56 million in the fourth quarter.
For 2020, WPX expects to generate free cash flow in excess of $200 million at $50 WTI oil prices. One of the company’s financial goals is to achieve a free cash flow yield of 7-10 percent over the next few years.
The company’s achievements in 2019 included the repurchase of $58 million of common stock, monetizing approximately $125 million of midstream investments into approximately $500 million in proceeds, lowering its weighted average interest rate for long-term debt, and increasing its gas capture in the Delaware Basin.
“Quite simply, we achieved or exceeded our 2019 targets and accelerated our longer-term targets,” said Rick Muncrief, WPX chairman and chief executive officer.
“We displayed discipline in our capital budget, generated free cash flow in the back half of the year, began returning capital to stockholders a year ahead of schedule, and generated handsome returns on two of our midstream investments.
“As we’ve articulated, we’re raising the bar higher in 2020 and beyond through our new five-year vision we shared with investors late last year.
WPX is wrapping up its $2.5 billion 2019 purchase of Denver-based Felix Energy and secured $900 million of 4.5% senior unsecured notes due 2030. WPX plans to fund the balance of the purchase price with 153 million shares of WPX stock issued to the seller.
Felix has approximately 58,500 net acres in an over-pressured, oily portion of the Delaware Basin, with anticipated production of approximately 60 MBoe/d (70% oil) at closing.
WPX based its transaction economics on $50 oil, with no assumptions for improvements in development costs or operating efficiencies. However, WPX believes significant upside exists by capturing synergies associated with scale.
WPX plans to implement a dividend after integrating the Felix assets, targeting approximately $0.10 per share on an annualized basis at initiation. The first payment is planned for third-quarter 2020.
For 2020, WPX has 65,000 bbl/d of oil hedged with fixed price swaps at a weighted average price of $57.07 per barrel and 20,000 bbl/d with collars at a weighted average price of $53.33 for the floor and $63.48 for the ceiling.
Additionally, WPX will assume 26,484 bbl/d of 2020 fixed price swaps executed by Felix Energy at a weighted average price of $57.87 in conjunction with the close of the acquisition.
On a pro-forma basis, WPX plans to invest $1,675-$1,800 million in total development capital this year, including $50-$75 million for midstream opportunities.
The 2020 capital budget supports 12 rigs in the Delaware Basin upon closing the Felix transaction. WPX also has three rigs deployed in the Williston Basin, with plans to drop a rig in the third quarter of 2020.
WPX board’s authorization to repurchase up to $400 million of WPX shares on an opportunistic basis also remains in place. The company has repurchased $58 million of its common stock at an average price of $10.16 per share.
WPX’s total liquidity at the close of business on Dec. 31, 2019, was approximately $1.5 billion, including cash, cash equivalents and all of its $1.5 billion available revolver capacity. WPX had nothing drawn against its revolver at year-end.
DELAWARE BASIN RESULTS
Delaware Basin production increased 23 percent year-over-year, rising from an average of 78.2 Mboe/d in 2018 to 96 Mboe/d in 2019.
WPX’s average realized oil price in the Delaware was WTI plus $0.15 in the fourth quarter, including Midland basis swaps.
The company’s fourth-quarter Delaware completions included the six-well CBR 35-38 pad in the Wolfcamp A and XY formations. The average peak rate was 3,166 Boe/d (51% oil). Thirty-day production averaged 2,648 Boe/d per well.
Fourth-quarter completions also included two Wolfcamp XY wells in WPX’s Rustler Breaks area in Eddy Co., N.M. The Dalmatian well hit a peak of 3,770 Boe/d (64% oil) while averaging 3,509 Boe/d over its first 30 days. The Shepherd well hit a peak of 3,688 Boe/d (63% oil) while averaging 3,257 Boe/d over its first 30 days.
During 2019, WPX reduced its Permian completions costs by 38 percent, from $673 per foot in fourth-quarter 2018 to $417 per foot in fourth-quarter 2019.
Also in 2019, the second 200 MMcf/d cryogenic processing train at WPX’s 50/50 joint venture gas plant in Reeves County, Texas, was commissioned in May. The 400 MMcf/d plant provides capacity for both WPX and third-party volumes.
Following the plant expansion, throughput in fourth-quarter 2019 was up 89 percent vs. fourth-quarter 2018. Additionally, in 2020, incremental volumes from WPX’s Sand Lake acreage will flow to the plant via a new 16-inch trunk line.
With the plant expansion and other infrastructure investments, WPX reduced its flaring rate in the Delaware Basin by 50 percent in 2019 vs. 2018.
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