WPX to receive $300MM cash, $132MM capital
carry and retain 50% ownership in $850MM+ entity at closing
WPX Energy (NYSE:WPX) has signed a strategic partnership with
Howard Energy Partners to jointly develop oil gathering and natural
gas processing infrastructure in the Stateline area of the
Permian’s Delaware Basin.
The joint venture with Howard is designed to support WPX’s
drilling operations in the Stateline area, representing 50,000 net
acres, or 37 percent of WPX’s roughly 135,000 net acre position in
the Delaware.
The joint venture includes crude oil gathering assets already
under construction and a planned natural gas processing complex. It
does not include WPX’s natural gas and water gathering systems in
the Stateline area, along with midstream rights to its remaining
acreage position in the Delaware.
In a separate transaction, WPX secured additional takeaway
capacity for its Delaware Basin natural gas volumes and an equity
position in the related pipeline. Further details are provided in
this release.
JOINT VENTURE HIGHLIGHTS
- 50/50 joint venture between WPX and
Howard Energy Partners
- Howard Energy Partners will finish
constructing the JV assets and serve as operator
- Dedication of 50,000 acres represents
37% of WPX’s total acreage in the Delaware
- Transaction implies a value of $863
million for Stateline oil gathering and gas processing
projects
- WPX receiving $300 million upfront from
Howard Energy Partners
- Howard Energy Partners to fund the
first $263 million of JV capital expenditures, including a $132
million carry for WPX
- No minimum volume or drilling
commitments
The joint venture will complete the buildout of a new crude oil
gathering system, already started by WPX in the basin, and begin
constructing a new cryogenic natural gas processing complex with a
planned initial capacity of 400 MMcf/d. The parties plan to seek
out third-party volumes in an area of mutual interest in the
Delaware Basin.
WPX has a 50 percent voting interest in the joint venture and
operational influence. The transaction value of $863 million for
the new joint venture is based on the cash to WPX, the capital
carry and WPX’s ownership interest.
As previously stated, WPX is retaining sole ownership of its
Stateline natural gas and water gathering systems which consist of
more than 375 miles of scalable existing infrastructure.
WPX believes the retained assets are worth considerably more
than the $500 million of implied value at the time of its
acquisition of RKI Exploration & Production nearly two years
ago.
EXPLAINING THE STRATEGY
“Our approach to supporting our growth plans in the Delaware
Basin uniquely differentiates WPX,” said Rick Muncrief, WPX’s
chairman, president and chief executive officer.
“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. Today’s agreement breaks
new ground on both fronts.
“For starters, our forward-looking action gives our long-term
Delaware development a competitive advantage. Second, we’re looking
at the bigger picture and how to extend value creation beyond the
drill bit by creating a premier Delaware midstream service
provider.
“We believe the Howard team has the right skills, capabilities
and focus to make this joint venture a success and we’re excited to
work with them,” Muncrief said.
This transaction builds on WPX’s successful track record for
creating value from the infrastructure it develops around its
operations. The company previously sold gathering systems in the
Williston and San Juan basins.
NEXT STEPS
The parties expect to close the transaction in the third quarter
subject to certain closing conditions. Prior to closing, WPX and
Howard will begin integrating efforts to continue to build out the
crude oil gathering system and begin work on the cryogenic
processing plant.
WPX already has installed approximately half of the planned
50-mile crude gathering system that initiated service in late 2016.
WPX currently has 40 wells tied in, some of which are awaiting
completion before starting deliveries into the system.
The trunkline is designed to have a capacity of approximately
125,000 barrels of oil per day. The parties expect to complete the
project in the first half of 2018 and believe it can be expanded
for other commercial opportunities with minimal capital investment
through additional horsepower and line looping.
The parties expect to complete the first 200 MMcf/d train for
the cryogenic natural gas processing complex in the first half of
2018. The parties plan to add a second train to double the capacity
by the middle of 2019.
More Delaware Takeaway Capacity
WPX is active in securing long-term takeaway capacity in the
basin for its associated gas production. As previously announced,
WPX recently signed an agreement to ship up to 200,000 MMBtu/d of
gas from the Waha hub to Katy, Texas, starting in November of this
year.
WPX also just completed a long-term agreement with WhiteWater
Midstream, which provides WPX with 300,000 MMBtu/d of natural gas
capacity from the Stateline area to Waha and 10 percent ownership
in the related Agua Blanca Pipeline. As part of the agreement with
WhiteWater, WPX has the right to increase its capacity to 500,000
MMBtu/d and its ownership up to 20 percent.
Agua Blanca will initially consist of 75 miles of 36-inch
diameter pipe with a capacity of 1.25 Bcf/d, expandable to 1.75
Bcf/d. WhiteWater expects to accept first volumes from the
Stateline area in the first half of 2018.
Background Information
Barclays acted as financial advisor to WPX on the joint
venture transaction. Holland and Hart served as the legal advisor.
Investors are encouraged to access a slide presentation about the
joint venture at www.wpxenergy.com.
Howard Midstream Energy Partners, LLC (dba Howard Energy
Partners) is based in San Antonio and is led by Mike Howard,
chairman and CEO. The company owns and operates natural gas
gathering and transportation pipelines, natural gas liquids
processing plants and other facilities in Texas and Pennsylvania.
More information is available at www.howardenergypartners.com.
WPX has posted double-digit oil volume growth
each of the past five years. The company is active in
the Delaware, Williston and San Juan basins. The Delaware
Basin is the western portion of the greater Permian
Basin. More information is available at www.wpxenergy.com.
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.
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version on businesswire.com: http://www.businesswire.com/news/home/20170613005557/en/
WPX EnergyMedia Contact:Kelly Swan,
539-573-4944orInvestor Contact:David Sullivan,
539-573-9360
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