Tulsa company completes $2.5 billion deal ahead of schedule
TULSA — WPX Energy and privately held Felix Energy closed a $2.5 billion deal ahead of schedule this month combining the two companies.
WPX's CEO Rick Muncrief said his company closed the transaction March 6, just a day after shareholders overwhelmingly approved its plan to acquire the private operator.
Felix, which like WPX operates in the Permian’s Delaware Basin, did its part by working closely with WPX representatives on sale-related issues and meeting anticipated daily production rates of 60,000 barrels of oil (equivalent, with 70% being crude) when the deal closed.
WPX stated the now-combined operations boosted average daily production to more than 150,000 barrels from both the Delaware and Williston basins.
“I want to thank the Felix team for working with us,” Muncrief said.
Felix was backed by private equity. WPX paid Felix's backer, EnCap Investments, $900 million in cash and provided 153 million WPX shares.
WPX also created two new positions on its board, filling those with EnCap representatives D. Martin Philips and Douglas E. Swanson Jr.
On March 6, Muncrief welcomed Philips and Swanson to the company’s board.
“Their considerable experience in industry and their private equity backgrounds add a unique perspective to WPX and how we can further create value as a company,” he stated.
Change of circumstance
When the acquisition plan was announced, WPX said it would provide greater cash flow certainty, making it possible to begin making dividend payments to shareholders and continue its share buyback program.
However, that was before fears about the spread of the coronavirus began to impact demand expectations for crude on global markets, and before last week’s collapse of talks about further production restrictions to support global pricing for the commodity between Russia and the Organization of the Petroleum Exporting Countries.
The company is watching the situation closely.
“Like everyone, we’re reassessing our 2020 capital program based on current events, and as always, will take a thoughtful, measured response,” a spokesman said.
An oily portion of the basin
The Delaware Basin is one of three that make p the greater Permian Basin.
The basin extends north from the toe of west Texas into southern New Mexico.
WPX officials said Felix held 58,500 acres in an overpressured, oily portion of the basin featuring six productive benches, including 1,500 undeveloped locations with opportunities to drill wells with 2-mile-long laterals.
The deal met prescribed tenets the company told shareholders in November it would strive to meet during the next five years, Muncrief previously said.
On a pro forma basis, WPX would expect to generate about $200 million in free cash flow in 2020 at $50 oil, and could more than double that if the average price for oil were $60 a barrel that year.
WPX expected its earnings per share, return on capital employed and cash margins would increase, given Felix already had proven its assets.