Tulsa-based independent WPX Energy Inc. has eliminated natural gas transportation obligations that had supported its former Piceance Basin operations in an agreement with Citadel NGPE LLC.
WPX agreed to buy out its remaining transportation obligations for $239 million, releasing all of its firm transportation capacity across four interstate pipelines to Citadel.*
Citadel launched a physical gas business in 2014. Management said the WPX deal underscores its commitment to expanding its presence in the market.
"We see natural gas transportation as a foundation for the growth of our physical business and are excited to be expanding in this market," said Citadel's Mark Stainton, head of commodities. "This transaction builds on our track record of success in commodities and commitment to providing our investors with access to attractive opportunities in the energy space."
For WPX, the buyout eliminates $164 million in letters of credit and their associated annual interest expenses, and releases the producer from nearly $400 million in demand obligations from 2016 through 2032.
"This is another strategic step in the transformation of our company and the simplification of our story," WPX CEO Rick Muncrief said. "It strengthens our liquidity, increases cash flow in subsequent years, frees up future revolver capacity and completes our full exit from the Piceance Basin."
Piceance-focused subsidiary WPX Energy Rocky Mountain LLC was sold for $910 million in April to Terra Energy Partners LLC (see Shale Daily, Feb. 9).
The transaction with Citadel is expected to be completed by the end of September. Following closing, WPX expects to have about $1.3 billion in liquidity, consisting of $1.025 billion in undrawn revolver capacity along with its unrestricted cash and cash equivalents.
*Correction: In the original version of this article, NGI incorrectly stated that Citadel agreed to pay $239 million for the contracts, allowing WPX to release all of its firm transportation capacity across four interstate pipelines. NGI regrets the error.