WPX Energy Inc. exceeded its 2015 goal of reducing debt through monetizing $400-500 million of its assets after agreeing to sell its gathering system in the San Juan Basin to an infrastructure fund for $309 million.
Tulsa-based WPX said ISQ Global Infrastructure Fund, managed by I Squared Capital, has agreed to pay $285 million in cash and commit an estimated $24 million to expand the system to support development in the Gallup oil play. The deal is subject to closing adjustments and is expected to close by the end of March.
The agreement increases the amount of WPX's recent divestitures to nearly $575 million. Last September, the company sold its portfolio of coalbed methane wells in the Powder River Basin to an affiliate of Moriah Group LLC for $80 million (see Shale Daily, Sept. 3, 2015). One month prior, WPX sold its North Dakota gathering system in the Van Hook peninsula area to a private equity fund for $185 million (see Shale Daily, Aug. 31, 2015).
WPX said the sales are part of its deleveraging plan following last year's acquisition of RKI Exploration & Production LLC's portfolio in the Permian Basin for $2.75 billion (see Shale Daily, July 14, 2015). WPX currently has net debt of $3.2 billion, which includes $3 billion in notes; the remainder is primarily in revolver borrowings.
CEO Rick Muncrief said WPX "exceeded our 2015 target and will continue to prioritize debt reduction in 2016."
WPX said it was continuing to evaluate its options for accelerating the value of its holdings in the Piceance. According to the company's most recent investor presentation last November, WPX holds about 200,000 net acres in the Piceance with about 11,000 gross drilling locations.
Under the terms of the agreement with ISQ, WPX would continue operating the San Juan system for at least another two years, with an opportunity to continue operating it beyond that time. Upon closing, the gathering system would consist of more than 220 miles of oil, gas and water gathering lines that WPX built to support its Gallup drilling program, which began in 2013 (see Shale Daily, Aug. 20, 2014; Aug. 7, 2013).
WPX holds about 100,000 net acres in the Gallup oil play -- part of its 232,000 net acres in the San Juan Basin -- with production exceeding 10,000 b/d in 3Q2015. The company also holds 92,000 net acres in the Permian and 87,000 net acres in the Williston Basin.