A loss of $208 million or 46-cents a share was reported Wednesday by Tulsa-based WPX Energy in its first quarter earnings report.
Cash flow from operations, inclusive of hedge impact, was $256 million in first-quarter 2020, down just 6 percent vs. the same period a year ago despite significant decreases in average realized commodity prices.
The first-quarter loss was primarily driven by $1 billion of impairments to the book value of the company’s assets in the Williston Basin which more than offset gains associated with the company’s hedging positions.
Excluding the derivative gains, impairments and other items, WPX posted adjusted net income from continuing operations (a non-GAAP financial measure) in first-quarter 2020 of $30 million, or income of $0.07 per share. A reconciliation accompanies this press release.
Adjusted EBITDAX (a non-GAAP financial measure) increased 19 percent vs. a year ago to $370 million in first-quarter 2020 despite the drop in commodity prices. A reconciliation accompanies this press release.
At the end of the first quarter, WPX was producing more than 150,000 barrels per day (net) of oil following its acquisition of Felix Energy.
WPX has since curtailed production driven by the collapse in oil prices. WPX plans to shut-in approximately 30,000 bbl/d on a net basis in May, which represents about 45,000 bbl/d less in the market on a gross basis. Similar curtailments also are possible in June.
WPX’s total liquidity at the close of business on March 31, 2020, was approximately $1.4 billion including cash, cash equivalents and its available revolver capacity.
Subsequent to the close of the first quarter, WPX’s borrowing base under its credit facility that matures in April 2023 was reaffirmed. WPX’s borrowing base remains at $2.1 billion, with $1.5 billion in commitments. At the end of the first quarter, WPX had $114 million drawn against its revolver.
For the remainder of 2020, WPX has 91,787 bbl/d of oil hedged with fixed price swaps at a weighted average price of $57.88 per barrel and 20,000 bbl/day with fixed price collars at a weighted average floor price of $53.33.
After deterioration in oil pricing, WPX now expects to generate approximately $150 million in free cash flow in 2020. This estimate does not include savings for potential service price deflation.
For 2021, WPX has 190,000 MMBtu/d of natural gas hedged with fixed price swaps at a weighted average price of $2.60 per MMBtu and 9,959 bbl/d of oil hedged with a weighted average price of $39.81 per barrel.
In March, WPX repurchased 10.4 million shares for $43.5 million in the week after closing its acquisition of Felix Energy. Since third-quarter 2019, WPX has now retired a total of 16.1 million shares for $100.6 million. The average price was $6.30 per share.
As previously announced in March, WPX cut its original 2020 capital plan by $400 million. The company has since developed scenarios to cut another $150 million to $450 million. These cuts reduce WPX’s capital spending by roughly 40 percent vs. its original plan.
WPX is suspending its detailed guidance for production and other metrics given the volatility in the market and the fluid nature of how the company is responding. Any prior guidance for 2020 should not be relied upon.
WPX had 15 rigs running after integrating the Felix acquisition and plans to exit the year with six rigs, comprised of five in the Delaware Basin and one in the Williston Basin.
WPX also has dropped all four of its completion crews. Second-quarter first sales will be limited to a few wells that were completed prior to the release of the frac crews.
WPX plans to build an inventory of one to two quarters of drilled-but-uncompleted wells. Additional background on 2020 capital cuts and their impact on production and projected DUCs at year-end are provided in the first-quarter slide deck at www.wpxenergy.com.
WPX also plans to achieve $100 million in cost savings during the year through reductions to operating expenses such as LOE and GP&T, as well as lower G&A expenses.
INTEGRATED STRATEGIC ACQUISITION
During the first quarter, WPX completed its acquisition of Felix Energy ahead of schedule. The purchase was overwhelmingly approved by WPX shareholders at a special meeting held on March 5, 2020, where more than 99.6 percent of votes cast were in favor of the transaction.
At closing, WPX received approximately 58,000 acres of top-tier oily acreage in an over-pressured area of the Delaware Basin. As expected, Felix was producing 60 MBoe/d (70 percent oil) at the close of the transaction.
Source: WPX Energy