WPX Energy in Tulsa reported an unaudited second-quarter loss of $414 million or 74 cents a share, blaming the loss on derivatives. Cash flow was also down 24%.
The report was released as WPX Energy is slowly resuming completion operations.
The company said the loss was driven by a $275 million net loss on derivatives primarily from non-cash forward mark-to-market changes in the company’s hedge book and lower overall commodity prices. As underlying forward commodity prices began to improve in the quarter, the value of hedging contracts was reduced from levels recorded at March 31.
Otherwise, the company posted adjusted net income from continuing operations in the quarter of $69 million or 12 cents a share.
Adjusted EBITDAX hit a record $400 million in the quarter, up 15 percent from $347 million a year ago. A reconciliation accompanies this press release.
Cash flow from operations – inclusive of hedge impact – was $276 million in the second quarter, down 24 percent vs. a year ago due in part to significant decreases in commodity prices and working capital changes.
The weighted average gross sales price during second-quarter 2020 – prior to revenue deductions – was $21.85 per barrel for oil (down 62 percent vs. a year ago), $1.40 per Mcf for natural gas (down 20 percent) and $7.65 per barrel for NGL (down 44 percent).
Free cash flow from operations (a non-GAAP financial measure) in the second quarter was $166 million. A reconciliation accompanies this press release. WPX now expects to generate approximately $200 million of free cash flow in 2020, up from its prior estimate of $150 million.
For the remainder of 2020, WPX has 91,700 bbl/d of oil hedged with fixed price swaps at a weighted average price of $53.05 per barrel and 20,000 bbl/d with fixed price collars at a weighted average floor price of $53.33.
For 2021, WPX now has 59,878 bbl/d of oil hedged with fixed price swaps at a weighted average price of $40.78 per barrel and 240,000 MMBtu/d of natural gas hedged with fixed price swaps at a weighted average price of $2.62 per MMBtu.
Consistent with a scenario WPX outlined in its first-quarter slide deck, the company plans to exit the year at 140,000 bbl/d of oil. Most of the planned completions in the back half of the year are scheduled to occur in the fourth quarter.
WPX completed 12 wells in the second quarter prior to releasing all four of its completion crews. In July, the company redeployed one crew in the Delaware Basin and one in the Williston Basin. WPX plans to add one more frac crew in the Delaware Basin near the end of August.
WPX now expects total capital spending of $1,050 to $1,150 million this year, down another $50 million from the most recent target. Total capital spending in the first half of 2020 was $501 million, including $188 million in the second quarter following a pullback in activity.
The company could maintain the same level of oil production in 2021 – approximately 140,000 bbl/d – with an estimated maintenance capital budget of $800 to $850 million next year and generate approximately $200 million of free cash flow at current commodity prices.
“Our proactive risk mitigation strategy that included work on bolstering our balance sheet and building an industry-leading hedge book gives us flexibility, revenue certainty and stability in our development program against the unusual backdrop caused by COVID-19,” said Rick Muncrief, chairman and chief executive officer.
“This operational continuity benefits us not only in 2020, but in 2021 and 2022 as we think about the cadence of how to optimize our resources, manage capital requirements and enhance our free cash flow capabilities.
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