TULSA, Okla.--(BUSINESS WIRE)--
WPX Energy (NYSE:WPX) announced today it signed an agreement to sell a
working interest in certain of its existing Piceance Basin wells to
Legacy Reserves LP, a Midland-based master limited partnership, for $355
million cash subject to closing adjustments.
The agreement also provides WPX with 10 percent ownership in a newly
created class of incentive distribution rights (IDR) with Legacy. WPX
has the opportunity to increase its ownership to 30 percent, contingent
upon completing other transactions in the future. This would include the
potential to partner on third-party acquisitions.
The parties expect to close the sale during the second quarter, with an
effective date of Jan. 1, 2014. The working interests represent 279
billion cubic feet equivalent of reserves based on contractual terms and
commodity price assumptions as of Dec. 31, 2013, or approximately 9
percent of WPX’s year-end 2013 Piceance proved reserves.
The average production for the working interest over the next five years
is expected to be 71 million cubic feet equivalent per day. WPX’s
full-year 2013 Piceance production average was 727 MMcfe/d.
“We see tremendous benefits here on multiple fronts that are all
accretive to our outlook,” said Jim Bender, WPX president and chief
executive officer.
“First, the sales price reflects an attractive valuation of our
company’s most important and largest asset – our Piceance Basin
position. Second, the cash largely fills the gap in our 2014 capital
plan.
“The nature of the transaction also effectively accomplishes the same
outcome as pursuing the formation of our own master limited partnership
without increasing the complexity of our corporate structure. This
allows us to stay focused on WPX and keep our story simple.
“And strategically, the agreement provides upside incentives for WPX to
work with Legacy on future deals if there are mutual benefits for both
parties. They are an attractive partner with a proven record,” Bender
added.
The agreement provides Legacy with 30 percent of WPX’s working interest
in proved developed producing (PDP) Piceance wells that were drilled
prior to 2009. The working interest increases to 37.5 percent in 2015
and 42 percent in 2016.
WPX’s undeveloped locations in western Colorado’s Piceance Basin – as
well as the production and reserves associated with its recent Niobrara
Shale natural gas discovery – are not included in the transaction.
Overall, WPX has more than 12,000 remaining drillable locations in the
Piceance.
WPX continues to expect to invest $475 million to $495 million in its
Piceance Basin properties during 2014. This range includes funding for
the continued delineation of WPX’s Niobrara Shale discovery.
Barclays provided a fairness opinion to WPX Energy in connection with
this transaction.
Management will discuss the transaction and its first-quarter results
during a webcast at 10 a.m. Eastern tomorrow. Participants are
encouraged to access the event and the corresponding slides at www.wpxenergy.com.
A limited number of phone lines also will be available at 877-299-4454.
International callers should dial 617-597-5447. The conference
identification code for both phone numbers is 48955215. A replay of the
webcast will be available on WPX’s website for one year following the
event.
About WPX Energy, Inc.
WPX Energy is an independent exploration and production company formed
during a spinoff two years ago. Overall, WPX has more than 30 years of
experience in its sector along with 40 local, state and federal awards
for efficiency, innovation and corporate social responsibility.
This press release includes “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995. All
statements, other than statements of historical facts, included in this
press release that address activities, events or developments that the
company expects, believes or anticipates will or may occur in the future
are forward-looking statements. Such statements are subject to a number
of assumptions, risks and uncertainties, many of which are beyond the
control of the company. Statements regarding future drilling and
production are subject to all of the risks and uncertainties normally
incident to the exploration for and development and production of oil
and gas. These risks include, but are not limited to, the
volatility of oil, natural gas and NGL prices; uncertainties inherent in
estimating oil, natural gas and NGL reserves; drilling risks;
environmental risks; and political or regulatory changes. Investors
are cautioned that any such statements are not guarantees of future
performance and that actual results or developments may differ
materially from those projected in the forward-looking statements. The
forward-looking statements in this press release are made as of the date
of this press release, even if subsequently made available by WPX Energy
on its website or otherwise. WPX Energy does not undertake and
expressly disclaims any obligation to update the forward-looking
statements as a result of new information, future events or otherwise.
Investors are urged to consider carefully the disclosure in our
filings with the Securities and Exchange Commission, available from us
at WPX Energy, Attn: Investor Relations, P.O. Box 21810, Tulsa,
Okla., 74102, or from the SEC’s website at www.sec.gov.
Additionally, the SEC requires oil and gas companies, in filings made
with the SEC, to disclose proved reserves, which are those quantities of
oil and gas, which, by analysis of geoscience and engineering data, can
be estimated with reasonable certainty to be economically producible –
from a given date forward, from known reservoirs, under existing
economic conditions, operating methods, and governmental regulations.
The SEC permits the optional disclosure of probable and possible
reserves. From time to time, we elect to use “probable” reserves and
“possible” reserves, excluding their valuation. The SEC defines
“probable” reserves as “those additional reserves that are less certain
to be recovered than proved reserves but which, together with proved
reserves, are as likely as not to be recovered.” The SEC defines
“possible” reserves as “those additional reserves that are less certain
to be recovered than probable reserves.” The Company has applied these
definitions in estimating probable and possible reserves. Statements of
reserves are only estimates and may not correspond to the ultimate
quantities of oil and gas recovered. Any reserve estimates provided in
this presentation that are not specifically designated as being
estimates of proved reserves may include estimated reserves not
necessarily calculated in accordance with, or contemplated by, the SEC‘s
reserves reporting guidelines. Investors are urged to consider closely
the disclosure in our SEC filings that may be accessed through the SEC’s
website at www.sec.gov.
The SEC’s rules prohibit us from filing resource estimates. Our
resource estimations include estimates of hydrocarbon quantities for (i)
new areas for which we do not have sufficient information to date to
classify as proved, probable or even possible reserves, (ii) other areas
to take into account the low level of certainty of recovery of the
resources and (iii) uneconomic proved, probable or possible reserves.
Resource estimates do not take into account the certainty of resource
recovery and are therefore not indicative of the expected future
recovery and should not be relied upon. Resource estimates might never
be recovered and are contingent on exploration success, technical
improvements in drilling access, commerciality and other factors.
Source: WPX Energy, Inc.