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Current WPX Stock Info

EUR Increase of 25%

WPX Energy (ticker: WPX), a Tulsa-based exploration and production company with focus areas in the Piceance, San Juan and Williston basins, is preparing to ramp up activity in the second half of 2015. The company announced the acquisition of 14,300 net acres in the San Juan last week, and now plans on increasing its Williston rig count to three before year end. There is currently one WPX rig running in the play, but a second is expected to arrive in August. Its Piceance rig count, meanwhile, will drop to one in the second half of 2015.

The majority of WPX’s production is currently sourced from its Piceance asset, but about 80% of budgeted capital expenditures are targeted at San Juan and Williston development moving forward.  “Those two represent our growth story,” said Rick Muncrief, President and Chief Executive Officer of WPX Energy, in the company’s Q1’15 conference call. “Our Williston and San Juan Gallup oil volumes jumped an impressive 60% and 376% respectively versus a year ago.”

Source: WPX June 2015 Presentation

Source: WPX June 2015 Presentation

Returns: 30% or Above

WPX updated its Williston operations in a press release on June 25, outlining the improvements realized from increased well stimulations. Its well type curves are now 750 MBOE, a 25% jump from previous estimates of 600 MBOE, and drilling and completion costs are now roughly $8 million apiece for 6 million pound completions, representing a year-over-year cost decline of more than 30%.

“The combination of cost reductions and higher EURs gives us the opportunity to generate returns in excess of 30% in today’s commodity price environment,” said Muncrief, who added the improvements pave the way for oil volumes to increase 20% on a year-over-year basis by 2016. The company said only 25% of its Williston acreage is developed and more than 600 gross drilling locations have been identified.

Not Alone on the Williston Front

Rising EURs and improved margins are becoming more prevalent in the Williston Basin, as operators continue to develop new recipes to exploit the elite oil field. Whiting Petroleum (ticker: WLL), the largest E&P in the Bakken/Three Forks, can generate internal rate of returns of 42% at $55/barrel prices. Continental Resources (ticker: CLR), another prominent player in the region, is targeting 800 MBOE type curves at completed costs of $7.7 million. Northern Oil & Gas has established similar rates of 800 MBOE EURs at roughly $7.5 million.

Source: WPX June 2015 Presentation

Source: WPX June 2015 Presentation

Williston Position

At the time of the announcement, WPX held more than 85,000 net acres in the Williston along with proved reserves of roughly 119 MMBOE. There are 14 wells awaiting completion and management previously mentioned it expects the backlog to increase to as much as 25 by the end of 2015. The company said increased well stimulations have yielded positive results, leading to a completion test well of 10 million pounds once operations resume. The company will exclusively use sand on the test and is expected to cost about $9 million. High intensity slick-water designs will also be tested and could possibly even further increase the EURs.

San Juan Reflecting Operational Improvements

The Gallup oil window in the San Juan Basin has also improved its margins, and WPX currently forecasts a 450 MBOE type curve with well costs potentially dipping for $4 million apiece. Costs are already down by 24% compared to 2014. The Williston and San Juan are collectively producing more than 40 MBOEPD, representing compound annual growth of 73%. Overall guidance for 2015 places volumes at 152 to 160 MBOEPD on capital expenditures of $675 to $775 million.

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