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WPX Energy to Grow Oil Output with Added Acreage in Delaware


Independent oil and gas operator WPX Energy Inc. WPX announced that it has increased its presence in the resource-rich Delaware Basin through the acquisition of assets from Panther Energy Company II, LLC and Carrier Energy Partners, LLC. The deal is valued at $775 million and has enabled WPX Energy to add nearly 32,000 net acres in the core of the Delaware Basin at an average cost of $18,600 per acre following its transformative purchase of RKI Exploration and Production in Aug 2015.

Acquisition Synergies

The acquisition will bring in nearly 6,500 barrels of oil equivalent per day (Boe/d) (55% oil) of existing production from 23 producing wells (17 horizontals); two drilled but uncompleted horizontal laterals; 18,100 net acres in Reeves, Loving, Ward and Winkler counties in TX; and 920 gross undeveloped locations in the geologic sweet spot of the Delaware Basin.

WPX Energy expects the new assets to be immediately accretive to its earnings. In addition, cash generated from these assets will continue to fund its deleveraging programs without raising its projected 2017 capital expenditure.

Focus on Delaware

WPX Energy continues to work on its strategy of ramping up oil production, which was evident from the rising share of liquids in its production mix.

The company’s focus on oil has started to yield results. In the Delaware Basin, the company has more than 5,500 gross drillable locations across 13 prospective intervals based on a resource assessment conducted this summer. This will further support its oil-focused production growth. Oil revenues in the third quarter accounted for nearly 77% of WPX Energy’s total product revenues.

The acquisition will further strengthen WPX Energy’s position in the Delaware Basin and boost oil production.

Looking Ahead

WPX Energy reaffirmed its 2016 production target in the range of 82–87 thousand barrels of oil equivalent per day (Mboe/d). However, the company expects fourth-quarter production to exceed the 42–44 Mbbl/d range.

WPX Energy is currently targeting 30% oil growth and 25% overall production growth in 2017 from the 2016 levels.

Price Movement

Over the last one year, WPX Energy has outperformed the Zacks categorized Oil & Gas – Exploration and Production – U.S. industry. During this period, company’s shares gained 212.5%, compared with the industry’s return of 65.9%.

WPX Energy is building up a strong portfolio of assets, which will continue to boost its performance. Ongoing investments in its core assets in the Delaware, Williston and San Juan basins will help the company enhance production and improve its performance.

Zacks Rank & Key Picks

WPX Energy currently has a Zacks Rank #3 (Hold). A few better-ranked stocks in the same space are Abraxas Petroleum Corporation AXAS, Denbury Resources Inc. DNR and W&T Offshore, Inc. WTI. All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Abraxas Petroleum’s 2017 estimates improved 100.0% to 12 cents over the last 60 days. In the last reported quarter, its earnings surpassed the Zacks Consensus Estimate by 50%.

Denbury Resources earnings beat estimates by 100% in the last reported quarter. Its Zacks Consensus Estimate for 2016 moved up by a penny in the last 60 days to 4 cents.

W&T Offshore’s earnings beat estimates by 44.2% in the last reported quarter. Its Zacks Consensus Estimate for 2017 narrowed to a loss of 60 cents from 78 cents in the last 60 days.

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