Sales part of WPX deleveraging plan following acquisition of Permian Basin properties in August
TULSA, Okla. – WPX Energy says it is selling its San Juan Basin gathering system for approximately $309 million to a portfolio company of ISQ Global Infrastructure Fund, a fund managed by I Squared Capital.
WPX is receiving $285 million cash subject to closing adjustments and a commitment estimated at $24 million in capital designated by the purchaser to expand the system to support WPX’s development in the Gallup oil play, according to a company press release.
The agreement increases the amount of WPX’s recent divestitures to nearly $575 million. WPX originally targeted $400-$500 million in activity for the latter half of 2015.
The sales are part of WPX’s deleveraging plan following its acquisition of Permian Basin properties in Aug. WPX also continues to evaluate options to accelerate value from its Piceance Basin holdings.
Currently, WPX has net debt of $3.2 billion consisting of $3 billion in notes and the remainder primarily in revolver borrowings.
“I’m pleased with the success of our asset sales,” said WPX CEO Rick Muncrief. “We exceeded our 2015 target and will continue to prioritize debt reduction in 2016.”
Under the terms of the agreement, WPX will continue to operate the gathering system for at least two years with the opportunity to continue in ensuing years. The parties expect to close in first-quarter 2016.
“We are excited about the opportunity to invest in the San Juan Basin and look forward to collaborating with WPX in the build-out of the gathering system,” said Adil Rahmathulla, Partner at I Squared Capital.
Upon closing, the gathering system will consist of more than 220 miles of oil, gas and water gathering lines that WPX installed in conjunction with drilling in the Gallup oil play, where it made a discovery in 2013.
Over the past two years, WPX has rapidly grown its footprint in the Gallup play to approximately 100,000 acres with oil production exceeding 10,000 barrels per day in third-quarter 2015, the company says.
Subsequent to the close of the third quarter, WPX initiated production on a three-well Gallup pad that produced approximately 2,500 barrels per day of oil over the first 30 days.
This represents an increase of more than 85 per cent vs. the company’s previous IP rates on its Gallup wells. The improvement is driven by changes WPX made to its Gallup drilling and completion design.
In November, WPX also divested a North Dakota gathering system that it built in conjunction with drilling in the Williston Basin.
JP Morgan Securities LLC acted as the exclusive financial advisor to WPX. Deutsche Bank Securities advised I Squared Capital on the transaction.