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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 8-K

 

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15 (d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of report (Date of earliest event reported):  July 29, 2020

 

WPX Energy, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware   1-35322   45-1836028
(State or Other Jurisdiction of   (Commission File Number)   (I.R.S. Employer
Incorporation)     Identification No.)

 

3500 One Williams Center, Tulsa, Oklahoma   74172-0172
(Address of Principal Executive Offices)   (Zip Code)

 

Registrant’s Telephone Number, Including Area Code:  855- 979-2012

 

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange
on which registered
Common Stock, $0.01 par value   WPX   New York Stock Exchange

 

Indicate by check mark whether the registrant is a emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

 

 

 

 

 

 

Item 2.02 Results of Operations and Financial Condition

 

On July 29, 2020, WPX Energy, Inc. announced its financial results and operating highlights for the second quarter of 2020. A copy of the press release is furnished as Exhibit 99.1 to this report.

 

The information furnished under this Item 2.02, including Exhibit 99.1, will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and will not be incorporated by reference into any filing under the Securities Act of 1933, except as may be set forth by specific reference in that filing.

 

Item 9.01(d) Financial Statements and Exhibits

 

Exhibit No.   Description
99.1   Press release dated July 29, 2020
104   Cover Page Interactive Data File. The cover page XBRL tags are embedded within the inline XBRL document (contained in Exhibit 101).

 

1

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

  WPX ENERGY, INC.
   
   
  By: /s/ Stephen E. Brilz
    Stephen E. Brilz
    Vice President and Secretary

 

DATED: July 29, 2020

 

 

 

EXHIBIT INDEX

 

Exhibit No.   Description
99.1   Press release dated July 29, 2020
104   Cover Page Interactive Data File. The cover page XBRL tags are embedded within the inline XBRL document (contained in Exhibit 101).

 

 

 

Exhibit 99.1

 

 

WPX Energy, Inc.

(NYSE:WPX)

www.wpxenergy.com

 

 

 

DATE: July 29, 2020

 

MEDIA CONTACT:

Kelly Swan
(539) 573-4944

INVESTOR CONTACT:

David Sullivan
(539) 573-9360

 

WPX Energy Reports 2Q 2020 Results

 

Discipline drives strong quarter

 

·Hedging strategy provides certainty, stability
·Cutting capital by $50 million; still targeting oil exit rate of 140,000 bbl/d at Dec. 31
·Now expecting approximately $200 million of free cash flow in 2020
·WPX completion design yields 35% improvement on Felix pad
·2Q oil volumes were 123,700 bbl/d after curtailments of ~20,000 bbl/d
·Nearly 60,000 bbl/d of oil hedged at over $40 per bbl for 2021

 

TULSA, Okla. – WPX Energy (NYSE:WPX) reported an unaudited second-quarter loss from continuing operations attributable to common shareholders of $414 million, or a loss of $0.74 per share on a diluted basis.

 

The loss was driven by a $275 million net loss on derivatives primarily from non-cash forward mark-to-market changes in the company’s hedge book and lower overall commodity prices. As underlying forward commodity prices began to improve in the quarter, the value of hedging contracts was reduced from levels recorded at March 31.

 

Excluding the forward mark-to-market changes in derivatives and other items, WPX posted adjusted net income from continuing operations (a non-GAAP financial measure) in second-quarter 2020 of $69 million, or income of $0.12 per share. A reconciliation accompanies this press release.

 

Adjusted EBITDAX (a non-GAAP financial measure) hit a record $400 million in the quarter, up 15 percent from $347 million a year ago. A reconciliation accompanies this press release.

 

Cash flow from operations – inclusive of hedge impact – was $276 million in the second quarter, down 24 percent vs. a year ago due in part to significant decreases in commodity prices and working capital changes.

 

The weighted average gross sales price during second-quarter 2020 – prior to revenue deductions – was $21.85 per barrel for oil (down 62 percent vs. a year ago), $1.40 per Mcf for natural gas (down 20 percent) and $7.65 per barrel for NGL (down 44 percent).

 

Free cash flow from operations (a non-GAAP financial measure) in the second quarter was $166 million. A reconciliation accompanies this press release. WPX now expects to generate approximately $200 million of free cash flow in 2020, up from its prior estimate of $150 million.

 

 

 

 

OUTLOOK

 

For the remainder of 2020, WPX has 91,700 bbl/d of oil hedged with fixed price swaps at a weighted average price of $53.05 per barrel and 20,000 bbl/d with fixed price collars at a weighted average floor price of $53.33.

 

For 2021, WPX now has 59,878 bbl/d of oil hedged with fixed price swaps at a weighted average price of $40.78 per barrel and 240,000 MMBtu/d of natural gas hedged with fixed price swaps at a weighted average price of $2.62 per MMBtu.

 

Consistent with a scenario WPX outlined in its first-quarter slide deck, the company plans to exit the year at 140,000 bbl/d of oil. Most of the planned completions in the back half of the year are scheduled to occur in the fourth quarter.

 

WPX completed 12 wells in the second quarter prior to releasing all four of its completion crews. In July, the company redeployed one crew in the Delaware Basin and one in the Williston Basin. WPX plans to add one more frac crew in the Delaware Basin near the end of August.

 

WPX now expects total capital spending of $1,050 to $1,150 million this year, down another $50 million from the most recent target. Total capital spending in the first half of 2020 was $501 million, including $188 million in the second quarter following a pullback in activity.

 

The company could maintain the same level of oil production in 2021 – approximately 140,000 bbl/d – with an estimated maintenance capital budget of $800 to $850 million next year and generate approximately $200 million of free cash flow at current commodity prices.

 

WPX remains committed to implementing a dividend. Given the ongoing economic uncertainty related to the pandemic, the company continues to evaluate the appropriate timing for initiation.

 

CEO PERSPECTIVE

 

“Our proactive risk mitigation strategy that included work on bolstering our balance sheet and building an industry-leading hedge book gives us flexibility, revenue certainty and stability in our development program against the unusual backdrop caused by COVID-19,” said Rick Muncrief, chairman and chief executive officer.

 

“This operational continuity benefits us not only in 2020, but in 2021 and 2022 as we think about the cadence of how to optimize our resources, manage capital requirements and enhance our free cash flow capabilities.

“For the quarter, our adjusted EBITDAX and free cash flow highlight the strength of our assets, our disciplined approach to risk management, and our thoughtful ability to work through challenges.

 

“We also added hedges for our 2021 oil volumes, proactively reshaped our debt towers, and showed improved performance on our new Felix assets by adjusting the completion design.

 

“I’m grateful for our resilient employees and service providers who quickly and safely ramped down activity and stayed ready to get back to work. Our teams are a differentiating factor in our success,” Muncrief added.

 

 

 

 

DELAWARE BASIN

 

WPX’s Delaware production in the Permian averaged 143.7 Mboe/d in the second quarter compared with 117.5 Mboe/d in the most recent quarter and 96.6 Mboe/d a year ago.

 

Prior to the release of frac crews, WPX completed eight Delaware wells during the second quarter including the six-well Huerfano pad associated with the Felix acquisition.

 

WPX began applying its own frac design to two of the wells on the Huerfano pad, making incremental changes to Felix’s design. The wells completed with the WPX design outperformed the others by 35 percent over 50 days at a lower cost. The WPX design has fewer stages, longer stage lengths, additional clusters per stage and tighter spacing between clusters.

 

The changes were only applied to the frac design. WPX continued to use Felix’s same progressive choke opening schedule, or slowback strategy, with regard to flowback. WPX will continue to monitor results and conduct more tests.

 

WPX’s average cost for drilling and completing a 2-mile Delaware well is down 35 percent from an average of $1,229 per foot in 2018 to $800 per foot for the second half of 2020. The current cost reflects a blend of the company’s legacy Stateline operations and its new Felix assets.

 

WILLISTON BASIN

 

Williston Basin production averaged 63.3 Mboe/d in second-quarter 2020 compared with 79.5 Mboe/d in the most recent quarter and 63.0 Mboe/d a year ago.

 

Prior to the release of frac crews, WPX completed the four-well Meadowlark pad in the Williston during the second quarter.

 

The highest 24-hour rate for the Meadowlark wells was 3,466 Boe/d (88 percent oil) on the 6-34 HW well, followed by 3,316 Boe/d (89 percent oil) on the 6-34 HB well. Thirty-day rates and cumulative volumes were impacted by decisions to shut in production during the quarter.

 

WPX is monitoring the availability of the Dakota Access Pipeline following a federal judge’s order to idle the line pending an environmental impact statement. WPX is taking additional mitigation measures to reduce its exposure to basis differentials for its Williston oil volumes.

 

2Q PRODUCTION

 

Total production volumes of 207.0 Mboe/d in second-quarter 2020 increased 5 percent vs. first-quarter 2020 and were 30 percent higher than the same period a year ago. Liquids volumes accounted for 77 percent of second-quarter 2020 production.

 

 

 

 

Oil volumes of 123,700 bbl/d in second-quarter 2020 were 1 percent higher vs. first-quarter 2020 and 26 percent higher than the same period a year ago. This reflects the benefit of volumes from the acquisition of Felix Energy in March despite curtailments in the quarter.

 

Average Daily Production  Q2   1Q Sequential 
   2020   2019   Change   2020   Change 
Oil (Mbbl/d)                         
Delaware Basin   76.6    46.5    65%   60.1    27%
Williston Basin   47.1    51.4    -8%   62.1    -24%
Subtotal (Mbbl/d)   123.7    97.9    26%   122.2    1%
                          
NGLs (Mbbl/d)                         
Delaware Basin   27.2    21.7    25%   24.9    9%
Williston Basin   8.2    5.7    44%   9.1    -10%
Subtotal (Mbbl/d)   35.4    27.4    29%   34.0    4%
                          
Natural gas (MMcf/d)                         
Delaware Basin   239.1    170.9    40%   194.7    23%
Williston Basin   47.9    35.0    37%   49.4    -3%
Subtotal (MMcf/d)   287.0    205.9    39%   244.1    18%
                          
Total Production (Mboe/d)   207.0    159.6    30%   196.9    5%

 

Note: 2020 volumes reflect the benefit of the March 6 Felix acquisition in the Delaware Basin.

 

Second-quarter production was impacted by curtailments and shut-ins as WPX protected the value of its resources in response to rapid decreases in pricing and demand associated with the pandemic and other factors.

 

Approximately 20,000 bbl/d of oil were curtailed in the quarter, with a peak of roughly 30,000 bbl/d in May. WPX began bringing production back online in June as market conditions started improving.

 

Total capital spending in second-quarter 2020 was $188 million, predominantly from $173 million in D&C activity for operated wells and $3 million for midstream infrastructure.

 

FINANCIAL SUMMARY

 

Most of WPX’s primary expense categories all declined in second-quarter 2020 on a per-Boe basis and an actual basis vs. a year ago due to the pullback in activity, production that was shut-in and overall efforts to reduce costs.

 

The lone exception was gathering, processing and transportation costs, which increased by $5 million over first-quarter 2020. These costs are more fixed in nature and also included the addition of a contract associated with the company’s purchase of Felix Energy.

 

 

 

 

For the first half of 2020, WPX posted a net loss from continuing operations attributable to common shareholders of $622 million, including a $594 million gain on derivatives that was more than offset by a nearly $1 billion impairment to the book value of WPX’s assets in the Williston Basin.

 

For the first half of 2020, WPX posted adjusted net income from continuing operations of $99 million, or income of $0.19 per share, up from $59 million for the same period in 2019. A reconciliation accompanies this press release.

 

Adjusted EBITDAX (a non-GAAP financial measure) for the first half of 2020 rose 17 percent to $779 million vs. the same period a year ago. A reconciliation accompanies this press release.

 

WPX’s total liquidity at the close of business on June 30, 2020, was approximately $1.9 billion, including cash, cash equivalents and all of its $1.5 billion available revolver capacity.

 

During the quarter, WPX issued $500 million in new 5.875 percent Senior Notes due in 2028. A portion of the proceeds from this offering were used to retire approximately $369 million of Senior Notes due in 2022, 2023 and 2024 through a tender offer that settled after the quarter closed.

 

WPX’s updated maturity schedule is detailed in the quarterly investor slide deck at www.wpxenergy.com. The company’s next significant bond payment does not occur until August 2023 when $242 million matures.

 

THURSDAY WEBCAST

 

The company’s next webcast takes place on July 30 beginning at 10 a.m. Eastern. Investors are encouraged to access the event and the corresponding slides at www.wpxenergy.com.

 

A limited number of phone lines also will be available at (833) 832-5123. International callers should dial (469) 565-9820. The conference code is 9577094.

 

FORM 10-Q

 

WPX plans to file its second-quarter 2020 Form 10-Q with the Securities and Exchange Commission this week. Once filed, the document will be available on the SEC and WPX websites.

 

ABOUT WPX ENERGY

 

WPX is an independent energy producer with core positions in the Permian and Williston basins. WPX’s production is approximately 80 percent oil/liquids and 20 percent natural gas. The company also has an infrastructure portfolio in the Permian Basin. Visit www.wpxenergy.com for more information.

 

# # #

 

 

 

 

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; political or regulatory changes; and disruptions to general economic conditions, including disruptions attributable to pandemics such as the COVID-19 pandemic. 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.

 

Additionally, the SEC requires oil and gas companies, in filings made with the SEC, to disclose proved reserves, which are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible – from a given date forward, from known reservoirs, under existing economic conditions, operating methods, and governmental regulations. The SEC permits the optional disclosure of probable and possible reserves. From time to time, we elect to use “probable” reserves and “possible” reserves, excluding their valuation. The SEC defines “probable” reserves as “those additional reserves that are less certain to be recovered than proved reserves but which, together with proved reserves, are as likely as not to be recovered.” The SEC defines “possible” reserves as “those additional reserves that are less certain to be recovered than probable reserves.” The Company has applied these definitions in estimating probable and possible reserves. Statements of reserves are only estimates and may not correspond to the ultimate quantities of oil and gas recovered. Any reserve estimates provided in this presentation that are not specifically designated as being estimates of proved reserves may include estimated reserves not necessarily calculated in accordance with, or contemplated by, the SEC’s reserves reporting guidelines. Investors are urged to consider closely the disclosure in our SEC filings that may be accessed through the SEC’s website at www.sec.gov.

 

The SEC’s rules prohibit us from filing resource estimates. Our resource estimations include estimates of hydrocarbon quantities for (i) new areas for which we do not have sufficient information to date to classify as proved, probable or even possible reserves, (ii) other areas to take into account the low level of certainty of recovery of the resources and (iii) uneconomic proved, probable or possible reserves. Resource estimates do not take into account the certainty of resource recovery and are therefore not indicative of the expected future recovery and should not be relied upon. Resource estimates might never be recovered and are contingent on exploration success, technical improvements in drilling access, commerciality and other factors.

 

 

 

 

WPX Energy, Inc.

Consolidated (GAAP)

(UNAUDITED)

 

   2019   2020 
(Dollars in millions)  1st Qtr   2nd Qtr   3rd Qtr   4th Qtr   Year   1st Qtr   2nd Qtr   Year 
Revenues:                                
Product revenues:                                        
Oil sales  $449   $511   $539   $551   $2,050   $465   $241   $706 
Natural gas sales   25    16    16    18    75    13    11    24 
Natural gas liquid sales   33    31    26    32    122    24    22    46 
Total product revenues   507    558    581    601    2,247    502    274    776 
Net gain (loss) on derivatives   (207)   78    175    (199)   (153)   869    (275)   594 
Commodity management   59    58    38    39    194    24    32    56 
Other   -    1    1    2    4    3    2    5 
Total revenues   359    695    795    443    2,292    1,398    33    1,431 
Costs and expenses:                                        
Depreciation, depletion and amortization   219    221    241    247    928    259    229    488 
Lease and facility operating   86    94    96    98    374    101    94    195 
Gathering, processing and transportation   42    40    49    52    183    62    67    129 
Taxes other than income   39    43    46    50    178    42    25    67 
Exploration   24    24    22    25    95    67    19    86 
General and administrative:                                        
General and administrative expenses   39    40    42    51    172    42    33    75 
Equity-based compensation   8    8    9    9    34    9    9    18 
Total general and administrative   47    48    51    60    206    51    42    93 
Commodity management   49    41    36    37    163    34    32    66 
Acquisition costs   -    -    -    3    3    27    3    30 
Impairment of proved properties   -    -    -    -    -    967    -    967 
Other-net   2    3    12    1    18    14    (7)   7 
Total costs and expenses   508    514    553    573    2,148    1,624    504    2,128 
Operating income (loss)   (149)   181    242    (130)   144    (226)   (471)   (697)
Interest expense   (41)   (40)   (38)   (40)   (159)   (48)   (49)   (97)
Gain (loss) on extinguishment of debt   -    -    (47)   -    (47)   1    -    1 
Gains on equity method investment transactions   126    247    -    7    380    -    2    2 
Equity earnings   2    1    3    3    9    3    5    8 
Other income   -    -    1    -    1    3    (1)   2 
Income (loss) from continuing operations before income taxes  $(62)  $389   $161   $(160)  $328   $(267)  $(514)  $(781)
Provision (benefit) for income taxes   (14)   84    39    (39)   70    (61)   (101)   (162)
Income (loss) from continuing operations  $(48)  $305   $122   $(121)  $258   $(206)  $(413)  $(619)
Income (loss) from discontinued operations   -    -    (1)   (1)   (2)   (180)   5    (175)
Net income (loss)  $(48)  $305   $121   $(122)  $256   $(386)  $(408)  $(794)
Less: Noncontrolling interest   -    -    -    -    -    2    1    3 
Net income (loss) attributable to WPX Energy, Inc.  $(48)  $305   $121   $(122)  $256   $(388)  $(409)  $(797)
Amounts attributable to WPX Energy, Inc.:                                        
Income (loss) from continuing operations  $(48)  $305   $122   $(121)  $258   $(208)  $(414)  $(622)
Income (loss) from discontinued operations   -    -    (1)   (1)   (2)   (180)   5    (175)
Net income (loss)  $(48)  $305   $121   $(122)  $256   $(388)  $(409)  $(797)
Summary of Production Volumes (1)                                        
Oil (MBbls)   8,648    8,905    9,991    10,279    37,822    11,121    11,259    22,381 
Natural gas (MMcf)   18,210    18,736    20,874    20,533    78,354    22,212    26,116    48,328 
Natural gas liquids (MBbls)   2,288    2,493    2,486    2,776    10,043    3,097    3,222    6,320 
Combined equivalent volumes (MBoe) (2)    13,971    14,520    15,955    16,478    60,924    17,921    18,834    36,755 
Per day volumes                                        
Oil (MBbls/d)   96.1    97.9    108.6    111.7    103.6    122.2    123.7    123.0 
Natural gas (MMcf/d)   202.3    205.9    226.9    223.2    214.7    244.1    287.0    265.5 
Natural gas liquids (MBbls/d)   25.4    27.4    27.0    30.2    27.5    34.0    35.4    34.7 
Combined equivalent volumes (Mboe/d) (2)    155.2    159.6    173.4    179.1    166.9    196.9    207.0    201.9 
(1) Excludes activity classified as discontinued operations.                                        
(2) Mboe are calculated using the ratio of six Mcf to one barrel of oil.                                        
Realized average price per unit (1)                                        
Oil (per barrel)  $51.92   $57.42   $53.92   $53.59   $54.20   $41.83   $21.42   $31.56 
Natural gas (per Mcf)  $1.36   $0.88   $0.77   $0.87   $0.96   $0.56   $0.43   $0.49 
Natural gas liquids (per barrel)  $14.47   $12.21   $10.73   $11.53   $12.17   $7.73   $6.74   $7.23 
(1) Excludes activity classified as discontinued operations.                                        
Expenses per Boe (1)                                        
Depreciation, depletion and amortization  $15.68   $15.24   $15.11   $14.95   $15.23   $14.48   $12.15   $13.29 
Lease and facility operating  $6.13   $6.50   $6.02   $5.92   $6.13   $5.66   $4.96   $5.30 
Gathering, processing and transportation  $2.98   $2.78   $3.10   $3.16   $3.01   $3.47   $3.53   $3.50 
Taxes other than income  $2.79   $2.95   $2.90   $3.00   $2.92   $2.36   $1.33   $1.83 
General and administrative:                                        
General and administrative expenses  $2.81   $2.73   $2.69   $3.07   $2.83   $2.33   $1.75   $2.04 
Equity-based compensation   0.56    0.56    0.54    0.60    0.57    0.52    0.49    0.50 
Total general and administrative  $3.37   $3.29   $3.23   $3.67   $3.40   $2.85   $2.24   $2.54 
Interest expense  $2.95   $2.76   $2.37   $2.45   $2.61   $2.66   $2.59   $2.63 
(1) Excludes activity classified as discontinued operations.                                        

 

 

 

 

WPX Energy, Inc.

Reconciliation of NON-GAAP Measures

(UNAUDITED)

 

   2019   2020 
(Dollars in millions, except per share amounts)  1st Qtr   2nd Qtr   3rd Qtr   4th Qtr   Year   1st Qtr   2nd Qtr   Year 
Reconciliation of adjusted income (loss) from continuing operations attributable to common stockholders:                                
Income (loss) from continuing operations attributable to WPX Energy, Inc. common stockholders - reported  $(48)  $305   $122   $(121)  $258   $(208)  $(414)  $(622)
Pre-tax adjustments:                                        
Impairments of proved properties and unproved leasehold cost  $-   $-   $-   $-   $-   $1,016   $-   $1,016 
Inventory and line-fill lower-of-cost or market adjustments  $-   $-   $-   $-   $-   $21   $-   $21 
Gains on equity method investment transactions  $(126)  $(247)  $-   $(7)  $(380)  $-   $(2)  $(2)
Loss on extinguishment of debt  $-   $-   $47   $-   $47   $-   $-   $- 
Impact of pending settlement offers and settlements  $-   $-   $11   $5   $16   $-   $-   $- 
Voluntary exit program  $-   $-   $3   $5   $8   $-   $-   $- 
Acquisition related costs  $-   $-   $-   $6   $6   $27   $3   $30 
Net gain on exchange of leasehold  $-   $-   $-   $-   $-   $-   $(5)  $(5)
Net (gain) loss on derivatives  $207   $(78)  $(175)  $199   $153   $(869)  $275   $(594)
Net cash received (paid) related to settlement of derivatives  $9   $(10)  $4   $9   $12   $117   $337   $454 
Total pre-tax adjustments  $90   $(335)  $(110)  $217   $(138)  $312   $608   $920 
Less tax effect for above items  $(20)  $76   $25   $(50)  $32   $(72)  $(136)  $(208)
Impact of state deferred tax rate changes and state related adjustments  $(1)  $-   $-   $(1)  $(2)  $(5)  $(1)  $(6)
Impact of federal tax valuation allowance  $1   $(9)  $1   $(3)  $(10)  $3   $12   $15 
Total adjustments, after tax  $70   $(268)  $(84)  $163   $(118)  $238   $483   $721 
                                        
Adjusted income (loss) from continuing operations attributable to common stockholders  $22   $37   $38   $42   $140   $30   $69   $99 

 

Reconciliation of adjusted diluted income (loss) per common share:                                
Income (loss) from continuing operations - diluted earnings per share - reported  $(0.11)  $0.72   $0.29   $(0.29)  $0.61   $(0.46)  $(0.74)  $(1.22)
Pretax adjustments (1):                                        
Impairments of proved properties and unproved leasehold cost  $-   $-   $-   $-   $-   $2.21   $-   $1.98 
Inventory and line-fill lower-of-cost or market adjustments  $-   $-   $-   $-   $-   $0.05   $-   $0.04 
Gains on equity method investment transactions  $(0.30)  $(0.58)  $-   $(0.02)  $(0.90)  $-   $-   $- 
Loss on extinguishment of debt  $-   $-   $0.11   $-   $0.11   $-   $-   $- 
Impact of pending settlement offers and settlements  $-   $-   $0.03   $0.01   $0.04   $-   $-   $- 
Voluntary exit program  $-   $-   $-   $0.01   $0.02   $-   $-   $- 
Acquisition related costs  $-   $-   $-   $0.01   $0.01   $0.06   $-   $0.06 
Net gain on exchange of leasehold  $-   $-   $-   $-   $-   $-   $(0.01)  $(0.01)
Net (gain) loss on derivatives  $0.49   $(0.19)  $(0.41)  $0.49   $0.36   $(1.89)  $0.49   $(1.16)
Net cash received (paid) related to settlement of derivatives  $0.02   $(0.02)  $0.01   $0.02   $0.03   $0.25   $0.60   $0.89 
Total pretax adjustments  $0.21   $(0.79)  $(0.26)  $0.52   $(0.33)  $0.68   $1.08   $1.80 
Less tax effect for above items  $(0.05)  $0.18   $0.06   $(0.12)  $0.08   $(0.15)  $(0.24)  $(0.41)
Impact of state deferred tax rate changes and state related adjustments  $-   $-   $-   $-   $(0.01)  $(0.01)  $-   $(0.01)
Impact of federal tax valuation allowance  $-   $(0.02)  $-   $(0.01)  $(0.02)  $0.01   $0.02   $0.03 
Total adjustments, after-tax  $0.16   $(0.63)  $(0.20)  $0.39   $(0.28)  $0.53   $0.86   $1.41 
Adjusted diluted income (loss) per common share  $0.05   $0.09   $0.09   $0.10   $0.33   $0.07   $0.12   $0.19 
Reported diluted weighted-average shares (millions)   421.0    423.5    421.8    417.2    422.0    458.0    559.7    508.8 
Effect of dilutive securities due to adjusted income (loss) from continuing operations attributable to common stockholders   2.6    -    -    1.8    -    2.2    1.9    2.2 
Adjusted diluted weighted-average shares (millions)   423.6    423.5    421.8    419.0    422.0    460.2    561.6    511.0 
                                         
(1) Per share impact is based on adjusted diluted weighted-average shares.                                        
                                         

 

Reconciliation of Adjusted EBITDAX                                
Net income (loss) - reported  $(48)  $305   $121   $(122)  $256   $(386)  $(408)  $(794)
Interest expense   41    40    38    40    159    48    49    97 
Provision (benefit) for income taxes   (14)   84    39    (39)   70    (61)   (101)   (162)
Depreciation, depletion and amortization   219    221    241    247    928    259    229    488 
Exploration expenses   24    24    22    25    95    67    19    86 
EBITDAX   222    674    461    151    1,508    (73)   (212)   (285)
Impairment of proved properties   -    -    -    -    -    967    -    967 
Inventory and line-fill lower-of-cost or market adjustments   -    -    -    -    -    21    -    21 
Gains on equity method investment transactions   (126)   (247)   -    (7)   (380)   -    (2)   (2)
Loss on extinguishment of debt   -    -    47    -    47    -    -    - 
Impact of pending settlement offers and settlements   -    -    11    5    16    -    -    - 
Voluntary exit program   -    -    3    5    8    -    -    - 
Acquisition costs   -    -    -    3    3    27    3    30 
Net gain on exchange of leasehold   -    -    -    -    -    -    (5)   (5)
Net (gain) loss on derivatives   207    (78)   (175)   199    153    (869)   275    (594)
Net cash received (paid) related to settlement of derivatives   9    (10)   4    9    12    117    337    454 
Equity-based compensation (2)   8    8    9    9    34    9    9    18 
Income (loss) from discontinued operations   -    -    1    1    2    180    (5)   175 
Adjusted EBITDAX (2)  $320   $347   $361   $375   $1,403   $379   $400   $779 

 

(2) Prior periods have been modified to include equity-based compensation in the calculation of Adjusted EBITDAX.

 

 

 

 

WPX Energy, Inc.

Reconciliation of Free Cash Flow

(UNAUDITED)

 

   2019   2020
(Dollars in millions)  1st Qtr   2nd Qtr   3rd Qtr   4th Qtr   Year   1st Qtr  2nd Qtr  Year
Reconciliation of free cash flow:                    
 Net cash provided by operating activities (GAAP)   $272   $362   $272   $351   $1,257   $256  $276  $532
 Exclude: Changes in operating assets and liabilities (1)    1    (60)   33    (7)   (33)  44  76  120
 Plus: Distributions from equity method investments in excess of cumulative earnings    4    3    4    3    14   4  3  7
 Less: Incurred capital expenditures (2)    (425)   (341)   (264)   (283)   (1,313)  (313)  (188)  (501)
 Less: Incurred capital expenditures related to consolidated partnerships    -    -    -    (8)   (8)  (13)  (7)  (20)
 Plus: Contributions from nonconrolling interests    -    -    -    -    -   18  6  24
 Less: Distributions to nonconrolling interests    -    -    -    -    -   -  -  -
 Free cash flow (non-GAAP)   $(148)  $(36)  $45   $56   $(83)  $(4)  $166  $162

 

(1) Q1 2020 excludes a $184 million accrual for a performance guarantee included in gathering contracts assumed by the purchaser of our San Juan Basin assets.

(2) Q1 2019 includes a $100 million purchase of surface acreage in the Delaware Basin that was funded in part by the sale of non-core properties in the Delaware Basin.  

 

 

 

 

WPX Energy, Inc.

Consolidated Statements of Operations

(Unaudited)        

 

    Three months ended June 30,    Six months ended June 30, 
    2020    2019    2020    2019 
   (Millions, except per-share amounts) 
Revenues:                    
Product revenues:                    
Oil sales  $241   $511   $706   $960 
Natural gas sales   11    16    24    41 
Natural gas liquid sales   22    31    46    64 
Total product revenues   274    558    776    1,065 
Net gain (loss) on derivatives   (275)   78    594    (129)
Commodity management   32    58    56    117 
Other   2    1    5    1 
Total revenues   33    695    1,431    1,054 
Costs and expenses:                    
Depreciation, depletion and amortization   229    221    488    440 
Lease and facility operating   94    94    195    180 
Gathering, processing and transportation   67    40    129    82 
Taxes other than income   25    43    67    82 
Exploration   19    24    86    48 
General and administrative (including equity-based compensation of $9 million, $8 million, $18 million and $16 million  for the respective periods)   42    48    93    95 
Commodity management   32    41    66    90 
Impairment of proved properties   -    -    967    - 
Acquisition costs   3    -    30    - 
Other - net   (7)   3    7    5 
Total costs and expenses   504    514    2,128    1,022 
                     
Operating income (loss)   (471)   181    (697)   32 
Interest expense   (49)   (40)   (97)   (81)
Gains on equity method investment transactions   2    247    2    373 
Equity earnings   5    1    8    3 
Other income   (1)   -    3    - 
Income (loss) from continuing operations before income taxes   (514)   389    (781)   327 
Provision (benefit) for income taxes   (101)   84    (162)   70 
Income (loss) from continuing operations   (413)   305    (619)   257 
Income (loss) from discontinued operations   5    -    (175)   - 
Net income (loss)   (408)   305    (794)   257 
Less: Net income attributable to noncontrolling interest   1    -    3    - 
Net income (loss) attrributable to WPX Energy, Inc.  $(409)  $305   $(797)  $257 
                     
Amounts attributable to WPX Energy, Inc. common stockholders:                    
Income (loss) from continuing operations  $(414)  $305   $(622)  $257 
Income (loss) from discontinued operations   5    -    (175)   - 
Net income (loss)  $(409)  $305   $(797)  $257 
Basic and Diluted income (loss) per common share:                    
Income (loss) from continuing operations  $(0.74)  $0.72   $(1.22)  $0.61 
Income (loss) from discontinued operations   0.01    -    (0.35)   - 
Net income (loss)  $(0.73)  $0.72   $(1.57)  $0.61 
Basic weighted-average shares   559.7    422.5    508.8    421.8 
Diluted weighted-average shares   559.7    423.5    508.8    423.6 

  

 

 

WPX Energy, Inc.

Consolidated Balance Sheets

(Unaudited)  

 

   June 30,
2020
   December 31,
2019
 
   (Millions) 
ASSETS          
Current assets:          
Cash and cash equivalents  $407   $60 
Accounts receivable, net of allowance   424    450 
Derivative assets   345    57 
Inventories   27    41 
Other   42    39 
Total current assets   1,245    647 
Investments   41    48 
Properties and equipment (successful efforts method of accounting)   10,261    11,244 
Less- accumulated depreciation, depletion and amortization   (1,840)   (3,654)
Properties and equipment, net   8,421    7,590 
Derivative assets   34    10 
Other noncurrent assets   117    118 
Total assets  $9,858   $8,413 
           
LIABILITIES AND EQUITY          
Current liabilities:          
Accounts payable  $412   $556 
Accrued and other current liabilities   239    251 
Current portion of long-term debt   369    - 
Derivative liabilities   90    91 
Total current liabilities   1,110    898 
Deferred income taxes   137    290 
Long-term debt, net   3,210    2,202 
Derivative liabilities   51    - 
Other noncurrent liabilities   658    508 
Contingent liabilities and commitments          
Preferred units of consolidated partnership   11    - 
Stockholders' equity:          
Preferred stock (100 million shares authorized at $0.01 par value; no shares outstanding)   -    - 
Common stock (2 billion shares authorized at $0.01 par value; 559.5 million shares and 416.8 million shares issued and outstanding at June 30, 2020 December 31, 2019)   6    4 
Additional paid-in-capital   8,653    7,692 
Accumulated deficit   (3,978)   (3,181)
Total stockholders' equity   4,681    4,515 
Total liabilities and equity  $9,858   $8,413 

 

 

 

 

WPX Energy, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

 

   Six months ended June 30, 
   2020   2019 
   (Millions) 
Operating Activities(a)          
Net income (loss)  $(794)  $257 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:          
Depreciation, depletion and amortization   488    440 
Deferred income tax provision (benefit)   (153)   69 
Provision for impairment of properties and equipment (including certain exploration expenses)   1,050    41 
Gains related to equity method investment transactions   (2)   (373)
Net (gain) loss on derivatives   (594)   129 
Net settlements related to derivatives   454    (1)
Amortization of stock-based awards   19    17 
Cash provided by (used in) operating assets and liabilities:          
Accounts receivable   129    (145)
Inventories   16    2 
Other current assets   3    (1)
Accounts payable   (172)   203 
Federal income taxes receivable   (19)   38 
Accrued and other current liabilities   (61)   (17)
Liabilities related to discontinued operations   149    (15)
Other, including changes in other noncurrent assets and liabilities   19    (10)
Net cash provided by operating activities (a)   532    634 
           
Investing Activities(a)          
Capital expenditures(b)   (598)   (774)
Capital expenditures related to consolidated partnerships(c)   (21)   - 
Proceeds from sales of assets and equity method investments transactions   4    590 
Purchase of a business, net of cash acquired   (915)   - 
Contributions to equity method investments   -    (18)
Distributions from equity method investments in excess of cumulative earnings   7    7 
Net cash used in investing activities (a)   (1,523)   (195)
           
Financing Activities          
Proceeds from common stock   1    1 
Payments for repurchases of common stock   (44)   - 
Borrowings on credit facility   860    1,002 
Payments on credit facility   (860)   (1,332)
Proceeds from long-term debt, net of discount   1,383    - 
Payments for retirement of long-term debt, including premium   (2)   - 
Taxes paid for shares withheld   (8)   (15)
Payments for debt issuance costs   (6)   - 
Contributions from noncontrolling interests in consolidated partnerships   24      
Other   (8)   14 
Net cash provided by (used in) financing activities   1,340    (330)
Net increase in cash and cash equivalents and restricted cash   349    109 
Cash and cash equivalents and restricted cash at beginning of period   80    18 
Cash and cash equivalents and restricted cash at end of period  $429   $127 

 

 

(a) Amounts reflect continuing and discontinued operations unless otherwise noted.
(b) Incurred capital expenditures were $501 million and $766 million for the respective periods. The difference between incurred and cash capital expenditures is due to changes in related accounts payable and accounts receivable.
(c) Incurred capital expenditures were $20 million for 2020. The difference between incurred and cash capital expenditures is due to changes in related accounts payable and accounts receivable.

 

 

 

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