WPX Energy altered its course when it selected Continental Resources Inc. executive Rick Muncrief as its new CEO in May 2014.
Before the end of the same year, WPX had sold off its international assets for $294 million, including its stake in Apco Oil and Gas International Inc., completed selling working interests in some Colorado gas wells for $355 million, announced a sale of its Wyoming coal bed methane properties and bolstered its acreage in the San Juan Basin’s oil play.
“A series of significant transactions this year are shaping a transformed and more focused WPX,” Muncrief said at the time.
“We are moving value forward, monetizing noncore assets and simplifying our business scope. All of these actions are clearing the runway for our long-term plans.”
Clearing the runway, indeed.
Tulsa-based WPX climbed 10 spots in this year’s Oklahoma Inc. rankings to land within the top 10 for the first time since it was spun out of the Williams Cos. in 2012.
Then, 80 percent of its production was natural gas. Investors have fallen in love with the firm because of its efforts to get oily, fast.
The 2014 changes made after Muncrief’s arrival weren’t the only ones WPX has executed to radically change its production profile.
After oil prices collapsed, WPX took a page from Continental’s playbook in early 2015 by choosing to hang on to the firm’s essential staff, rather than conducting widespread layoffs (the majority of its staff reductions were associated with asset sales).
While the company did slash its capital expenditures budget by 50 percent, Muncrief said its decision to keep its technical staff and focus ongoing efforts in its core areas of the San Juan, Piceance and Williston basins were part of the firm’s plans.
“Our capital plan is prudent, disciplined and consistent with our long-term focus,” Muncrief said at the time.
In May the same year, WPX completed selling a package of Marcellus Shale marketing contracts for $200 million and released pipeline transportation capacity commitments worth $390 million in costs to an undisclosed buyer.
Then, just months later, WPX completed its $2.75 billion purchase of Oklahoma City-based RKI Exploration and Production LLC, giving it a strong presence in the West Texas Permian Basin, including 92,000 net acres and thousands of potential drilling locations.
“This is a defining moment for our company,” Muncrief said.
In January 2017, WPX announced it was buying about 18,000 additional net acres in the basin including 920 more drilling locations from Panther Energy Co.II and Carrier Energy Partners LLC for $775 million.
It predicted its year-over-year oil production would climb by 30 percent through those additions. It also sold its entire Piceance Basin natural gas position, at one time the company’s core asset, for about $900 million.
In June 2017, it announced it had entered into an $863 million joint venture with Howard Energy Partners to build out crude oil gathering infrastructure and to build a natural gas processing plant that would support its drilling operations in the Permian Basin.
“As a producer, this is a bold and innovative way to lay a well-defined path for our expected volumes and create an additional platform for generating shareholder value,” Muncrief said, noting the agreement “breaks new ground on both fronts.”
In February of this year, WPX announced it would sell its remaining assets in northwest New Mexico’sSan Juan Basin for $700 million, saying the deal would complete its efforts to withdraw from the play and speed up its debt reduction efforts.
Once the sale completed, WPX operations were focused in the Permian’s Delaware Basin in southeast New Mexico and west Texas and in the North Dakota Williston Basin, which is home to the Bakken Shale.
“Our bias for action has completely reshaped our story and our outlook, evidenced by the positive trends in our financial results,” Muncrief stated, reiterating the firm “is opportunistic, disciplined and committed to a strong balance sheet, ample liquidity and ongoing value creation.”
Throughout the company’s six year history as a stand-alone operation, its oil production rates have increased exponentially. Its production now is 80 percent liquid.
Up the list
While WPX has been hurt like many other Oklahoma-based oil and natural gas producers by hedges that anticipated lower-than-actual oil prices, it still achieved impressive returns for the year.
According to S&P Global Market Intelligence, the firm posted an 86.6 percent one year total return, including stock and dividends, and also boosted its revenues year-over-year by 16.8 percent.
David Sullivan, WPX’s director of investor relations, attributed the company’s turnaround to Moncrief, his vision and the staff’s execution of that plan.
He also highlighted the joint venture WPX entered into with Howard Energy Partners, noting that ongoing work to build takeaway capacity for WPX in the field has enabled it to continue to accelerate its development plans.
Sullivan said the company is running 10 drilling rigs, seven of those in the Permian, and is ahead of schedule on reducing debt.
“In September of 2016, we laid out a plan to de-lever the balance sheet, grow production and expand our margins,” Sullivan said.
“What you are seeing in the stock performance is a recognition by the street that rewards us not only for our strategy, but our execution of that strategy.”
An analyst agreed.
“When you look at the Amex Natural Gas Index in the last five years, it’s down nearly 39 percent,” said Greg Womack, president and principle of Womack Investment Advisers.
“WPX was smart to de-lever. Too much debt is like running a boat race with the anchor in the water. They were also looking at the trends and making decisions on where it needed to be in relation to commodity price-trends. Companies that have moved out of natural gas and into oil have done way better than those who haven’t.”
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