WPX Energy acquires Felix Energy for $2.5B
WPX Energy (WPX) “is taking another significant step in its commitment to delivering shareholder value” with the $2.5B purchase of Felix Energy, “one of the highest quality Delaware Basin operators.”
Felix has approximately 1,500 gross undeveloped locations in the eastern portion of the basin, with expected production of approximately 60 MBoe/d (70% oil) at the time of anticipated closing. WPX plans to implement a dividend post-closing, targeting approximately $0.10 per share on an annualized basis at initiation.
WPX Energy, Inc., an independent oil and natural gas exploration and production company, engages in the exploitation and development of unconventional properties in the United States. The company operates 657 wells and owns interests in 808 wells covering an area of approximately 130,000 net acres located in Delaware Basin, Texas and New Mexico; and operates 323 wells and owns interests in 87 wells that covers an area of approximately 85,087 net acres situated in the Williston Basin, North Dakota.
The acquisition and dividend program follow other steps WPX took in 2019 to enhance its value proposition, including reducing net debt, executing attractive midstream monetizations, launching a share buyback program and generating free cash flow.
The purchase price consists of $900M cash, subject to closing adjustments, and $1.6B in WPX stock issued to the seller.
WPX plans to fund the cash portion through issuance of $900M of senior notes on an opportunistic basis.
WPX also has obtained committed financing from Barclays in connection with the transaction and has full access to a $1.5B revolving credit facility.
The stock consideration comprises approximately 153M WPX shares, which is based on the 10-day volume-weighted average price as of Dec. 13.
The transaction is subject to customary closing conditions and approval by WPX shareholders. The parties anticipate closing the transaction early in the second quarter of 2020.
WPX’s board unanimously approved the transaction.
The acquisition is consistent with all of the tenets in WPX’s five-year vision for shareholders that the company introduced in November during its third-quarter report.
On a pro forma basis, WPX expects to generate significant free cash flow in 2020 at $50 oil.
Following the acquisition, cash flow per share, EPS, free cash flow per share, return on capital employed, and cash margins are all expected to increase.
WPX also expects to continue its opportunistic share buybacks, to implement the previously mentioned dividend program, and to reduce its leverage to 1.0x by year-end 2021.
WPX based all of its transaction economics on $50 oil, with no assumptions for improvements in development costs or operating efficiencies. However, WPX believes significant upside exists by capturing synergies associated with scale.
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