WPX Energy (WPX) announced today that it signed an agreement to sell its San Juan Basin gathering system for consideration of 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.
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 the year.
The sales are part of WPX’s deleveraging plan following its acquisition of Permian Basin properties in August. 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,” stated Rick Muncrief, WPX president and chief executive officer. “We exceeded our 2015 target and will continue to prioritize debt reduction in 2016.”
Adil Rahmathulla, Partner at I Squared Capital, added, “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.”
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.
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 its 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.
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 percent vs. the company’s previous IP rates on its Gallup wells. The improvement is driven by four 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 its drilling in the Williston Basin. These sales are examples of how WPX leveraged its investments in infrastructure to add value for shareholders.
JP Morgan Securities LLC acted as the exclusive financial advisor to WPX. Deutsche Bank Securities advised I Squared Capital on the transaction.
About WPX Energy, Inc.
WPX is a domestic energy producer with operations in the western United States. The company has reported double-digit oil volume growth in each of the past three years and is reshaping its portfolio through more than $4.5 billion of acquisitions and divestitures over the past 20 months.
About I Squared Capital
I Squared Capital is an independent global infrastructure investment manager focusing on energy, utilities and transport in North America, Europe and select high growth economies. The firm has offices in New York, Houston, London, New Delhi, Hong Kong and Singapore.