WPX Energy Inc. agreed Monday to sell off its final holding in the San Juan Basin, the Gallup play, for $700 million.
The Gallup leasehold sale to an undisclosed third party should be completed by the end of March, the Tulsa independent said, “signaling the company’s confidence in its two remaining core positions,” the Permian Basin’s Delaware sub-basin and the Williston Basin.
“WPX is now completely focused on our outstanding assets in the top two oil-prone basins in North America, the Permian’s Delaware Basin and North Dakota’s Williston Basin,” said CEO Rick Muncrief.
Gallup oil production averaged 10,800 b/d in the third quarter and represented less than 5% of gross undeveloped locations, management said.
Capital earmarked for the play is being reallocated to the other onshore plays. The Gallup buyer also is assuming associated transportation commitments, which means that WPX would have no future commercial obligations in the San Juan.
Late last year, WPX sold its legacy San Juan natural gas assets for $175 million. It also sold off its gathering system in the basin for $309 million.
“Our bias for action has completely reshaped our story and our outlook, evidenced by the positive trends in our financial results,” Muncrief said.
WPX’s output mix has undergone a complete turnaround from five years ago. Once the San Juan sale is complete, the company pro forma would be 80% weighted to oil and natural gas liquids and 20% natural gas. Five years ago, it was 80% weighted to natural gas. The operator has completed nearly $8 billion of transactions since then.
Gallup production is to be reflected in continuing operations for 4Q2017 and full-year 2017 results. San Juan volumes are to be reclassified as discontinued operations in 2018.
With the Gallup sale, WPX has revised its 2018 volume guidance to 75,000-80,000 b/d of oil and 117,000-126,000 boe/d of production. The original 2018 capital budget of $1.1-1.2 billion is unchanged.