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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-35322
https://cdn.kscope.io/7298d143eb0edb1d5432cf68d03c00f1-wpx-20200630_g1.jpg
WPX Energy, Inc.
(Exact Name of Registrant as Specified in Its Charter)

Delaware45-1836028
(State or Other Jurisdiction of Incorporation or Organization)(IRS Employer Identification No.)
3500 One Williams Center
Tulsa,Oklahoma74172-0172
(Address of Principal Executive Offices)(Zip Code)
855-979-2012
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock, $0.01 par valueWPXNew York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ  Accelerated filer 
Non-accelerated filer 
¨ (Do not check if a smaller reporting company)
  Smaller reporting company 
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. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes    No  þ
The number of shares outstanding of the registrant’s common stock at July 29, 2020 were 560,989,114.




WPX Energy, Inc.
Index
   Page
Part I.Financial Information
Item 1.Financial Statements (Unaudited)
Consolidated Balance Sheets as of June 30, 2020 and
December 31, 2019
Consolidated Statements of Operations for the three and six months ended June 30, 2020 and 2019
Consolidated Statements of Changes in Equity for the three and six months ended June 30, 2020 and 2019
Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019
Item 2.
Item 3.
Item 4.
Part II.Other Information
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Certain matters contained in this report include forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. These forward-looking statements relate to anticipated financial performance, management’s plans and objectives for future operations, business prospects, outcome of regulatory proceedings, market conditions and other matters.
All statements, other than statements of historical facts, included in this report that address activities, events or developments that we expect, believe or anticipate will exist or may occur in the future, are forward-looking statements. Forward-looking statements can be identified by various forms of words such as “anticipates,” “believes,” “seeks,” “could,” “may,” “should,” “continues,” “estimates,” “expects,” “forecasts,” “intends,” “might,” “goals,” “objectives,” “targets,” “planned,” “potential,” “projects,” “scheduled,” “will” or other similar expressions. These forward-looking statements are based on management’s beliefs and assumptions and on information currently available to management and include, among others, statements regarding:
amounts and nature of future capital expenditures;
expansion and growth of our business and operations;
financial condition and liquidity;
business strategy;
estimates of proved oil and natural gas reserves;
reserve potential;
development drilling potential;
cash flow from operations or results of operations;
acquisitions or divestitures;
seasonality of our business; and
crude oil, natural gas and NGL prices and demand.

2


Forward-looking statements are based on numerous assumptions, uncertainties and risks that could cause future events or results to be materially different from those stated or implied in this report. Many of the factors that will determine these results are beyond our ability to control or predict. Specific factors that could cause actual results to differ from results contemplated by the forward-looking statements include, among others, the following:
availability of supplies (including the uncertainties inherent in assessing, estimating, acquiring and developing future oil and natural gas reserves), market demand, volatility of commodity prices and the availability and cost of capital;
disruptions to general economic conditions as a consequence of global pandemics, including the COVID-19 pandemic;
inflation, interest rates, fluctuation in foreign exchange and general economic conditions (including future disruptions and volatility in the global credit markets and the impact of these events on our customers and suppliers);
the strength and financial resources of our competitors;
development of alternative energy sources;
the impact of operational and development hazards;
costs of, changes in, or the results of laws, government regulations (including climate change regulation and/or potential additional regulation of drilling and completion of wells), environmental liabilities, litigation and rate proceedings;
changes in maintenance and construction costs;
changes in the current geopolitical situation, including actions by members of the Organization of the Petroleum Exporting Countries (“OPEC”) and certain OPEC-cooperating countries such as Mexico and Russia (“OPEC+”);
our exposure to the credit risk of our customers and suppliers;
risks related to strategy and financing, including restrictions stemming from our debt agreements, future changes in our credit ratings, the availability and cost of credit, and access to equity markets;
risks associated with future weather conditions;
acts of terrorism;
other factors described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; and
additional risks described in our filings with the Securities and Exchange Commission (“SEC”).
All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above. Given the uncertainties and risk factors that could cause our actual results to differ materially from those contained in any forward-looking statement, we caution investors not to unduly rely on our forward-looking statements. Forward-looking statements speak only as of the date they are made. We disclaim any obligation to and do not intend to update the above list or to announce publicly the result of any revisions to any of the forward-looking statements to reflect future events or developments, except to the extent required by applicable laws. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.
In addition to causing our actual results to differ, the factors listed above and referred to below may cause our intentions to change from those statements of intention set forth in this report. Such changes in our intentions may also cause our results to differ. We may change our intentions, at any time and without notice, based upon changes in such factors, our assumptions or otherwise.
Because forward-looking statements involve risks and uncertainties, we caution that there are important factors, in addition to those listed above, that may cause actual results to differ materially from those contained in the forward-looking statements. For a detailed discussion of those factors, see Part II, Item 1A. Risk Factors in this report and Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019.

3

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 allowance424  450  
Derivative assets345  57  
Inventories27  41  
Other42  39  
Total current assets1,245  647  
Investments41  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, net8,421  7,590  
Derivative assets34  10  
Other noncurrent assets117  118  
Total assets$9,858  $8,413  
Liabilities and Equity
Current liabilities:
Accounts payable$412  $556  
Accrued and other current liabilities239  251  
Current portion of long-term debt (Note 7)369    
Derivative liabilities90  91  
Total current liabilities1,110  898  
Deferred income taxes137  290  
Long-term debt, net3,210  2,202  
Derivative liabilities51    
Other noncurrent liabilities 658  508  
Contingent liabilities and commitments (Note 9)
Preferred units of consolidated partnership11    
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 and 416.8
    million shares issued and outstanding at June 30, 2020 and December 31, 2019)
6  4  
Additional paid-in-capital8,653  7,692  
Accumulated deficit(3,978) (3,181) 
Total stockholders’ equity4,681  4,515  
Total liabilities and equity$9,858  $8,413  
See accompanying notes.

4

WPX Energy, Inc.
Consolidated Statements of Operations
(Unaudited) 
 Three months
ended June 30,
Six months
ended June 30,
 2020201920202019
Revenues:(Millions, except per-share amounts)
Product revenues:
Oil sales$241  $511  $706  $960  
Natural gas sales11  16  24  41  
Natural gas liquid sales22  31  46  64  
Total product revenues274  558  776  1,065  
Net gain (loss) on derivatives
(275) 78  594  (129) 
Commodity management32  58  56  117  
Other2  1  5  1  
Total revenues33  695  1,431  1,054  
Costs and expenses:
Depreciation, depletion and amortization229  221  488  440  
Lease and facility operating94  94  195  180  
Gathering, processing and transportation67  40  129  82  
Taxes other than income25  43  67  82  
Exploration (Note 5)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 (Note 5)
    967    
Acquisition costs (Note 2)3    30    
Other—net(7) 3  7  5  
Total costs and expenses504  514  2,128  1,022  
Operating income (loss)(471) 181  (697) 32  
Interest expense(49) (40) (97) (81) 
Gains on equity method investment transactions2  247  2  373  
Equity earnings5  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 (Note 3)5    (175)   
Net income (loss)(408) 305  (794) 257  
Less: Net income attributable to noncontrolling interest1    3    
Net income (loss) attributable to WPX Energy, Inc.
$(409) $305  $(797) $257  
Amounts attributable to WPX Energy, Inc. common stockholders:
Income (loss) from continuing operations$(414) $305  $(622) $257  
Income (loss) from discontinued operations5    (175)   
Net income (loss)$(409) $305  $(797) $257  
Basic and diluted income (loss) per common share (Note 4):
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 shares559.7  422.5  508.8  421.8  
Diluted weighted-average shares559.7  423.5  508.8  423.6  
See accompanying notes.

5

WPX Energy, Inc.
Consolidated Statements of Changes in Equity
(Unaudited)

 
Three months ended June 30,
 Preferred StockCommon
Stock
Additional
Paid-In-
Capital
Accumulated
Deficit
Total
Stockholders’
Equity
2020:(Millions)
Balance at March 31, 2020$  $6  $8,643  $(3,569) $5,080  
Net loss(409) (409) 
Stock-based compensation, net of tax impact10  10  
Balance at June 30, 2020$  $6  $8,653  $(3,978) $4,681  
2019:
Balance at March 31, 2019$  $4  $7,729  $(3,485) $4,248  
Net income305  305  
Stock-based compensation, net of tax impact8  8  
Balance at June 30, 2019$  $4  $7,737  $(3,180) $4,561  

Six months ended June 30,
Preferred StockCommon
Stock
Additional
Paid-In-
Capital
Accumulated
Deficit
Total
Stockholders’
Equity
2020:(Millions)
Balance at December 31, 2019$  $4  $7,692  $(3,181) $4,515  
Net loss(797) (797) 
Stock-based compensation, net of tax impact13  13  
Issuance of common stock related to an acquisition2  992  994  
Repurchases of common stock(44) (44) 
Balance at June 30, 2020$  $6  $8,653  $(3,978) $4,681  
2019:
Balance at December 31, 2018$  $4  $7,734  $(3,437) $4,301  
Net income257  257  
Stock-based compensation, net of tax impact3  3  
Balance at June 30, 2019$  $4  $7,737  $(3,180) $4,561  
See accompanying notes.

6

WPX Energy, Inc.
Consolidated Statements of Cash Flows
(Unaudited)

Six months
ended June 30,
 20202019
Operating Activities(a)(Millions)
Net income (loss)$(794) $257  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization488  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 derivatives454  (1) 
Amortization of stock-based awards19  17  
Cash provided by (used in) operating assets and liabilities:
Accounts receivable129  (145) 
Inventories16  2  
Other current assets3  (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 liabilities19  (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 investment transactions4  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 earnings7  7  
Net cash used in investing activities(a)(1,523) (195) 
Financing Activities
Proceeds from common stock1  1  
Payments for repurchases of common stock(44)   
Borrowings on credit facility860  1,002  
Payments on credit facility(860) (1,332) 
Proceeds from long-term debt, net of discount1,383    
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 partnerships24    
Other(8) 14  
Net cash provided by (used in) financing activities1,340  (330) 
Net increase in cash and cash equivalents and restricted cash349  109  
Cash and cash equivalents and restricted cash at beginning of period80  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.
See accompanying notes.

7

WPX Energy, Inc.
Notes to Consolidated Financial Statements

Note 1. Description of Business and Basis of Presentation
Description of Business
Operations of our company include oil, natural gas and NGL development and production primarily located in Texas, New Mexico and North Dakota. We specialize in development and production from tight-sands and shale formations in the Delaware and Williston Basins. Associated with our commodity production are sales and marketing activities, referred to as commodity management activities, that include oil and natural gas purchased from other third-parties in our operating areas in conjunction with the management of various commodity related contracts such as transportation.
In March 2020, we closed on the acquisition of Felix Energy Holdings II, LLC (“Felix”). Our operations include Felix activity after the close date. See Note 2 of Notes to Consolidated Financial Statements.
The consolidated businesses represented herein as WPX Energy, Inc. are also referred to as “WPX,” the “Company,” “we,” “us” or “our.”
Basis of Presentation
The accompanying interim consolidated financial statements do not include all the notes included in our annual financial statements and, therefore, should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2019 in the Company's Annual Report on Form 10-K. The accompanying interim consolidated financial statements include all normal recurring adjustments that, in the opinion of management, are necessary to present fairly our financial position at June 30, 2020, results of operations for the three and six months ended June 30, 2020 and 2019, changes in equity for the three and six months ended June 30, 2020 and 2019, and cash flows for the six months ended June 30, 2020 and 2019. The Company has no element of comprehensive income (loss) other than net income (loss).
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Our continuing operations comprise a single business segment, which includes the development, production and commodity management activities of oil, natural gas and NGLs in the United States.
Discontinued Operations
See Note 3 for a discussion of discontinued operations. Unless indicated otherwise, the information in the Notes to Consolidated Financial Statements relates to continuing operations.
Recently Adopted Accounting Standards
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses. This ASU, as further amended, affects trade receivables, financial assets and certain other instruments that are not measured at fair value through net income and requires entities to recognize an estimated credit loss expected over the life of an exposure through an allowance, which is re-measured at each reporting date. This ASU requires entities to consider a broader range of information when estimating expected credit losses, including current information and reasonable forecasts, which may result in the earlier recognition of losses. We applied this ASU effective January 1, 2020 using a modified retrospective approach. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This ASU eliminates, adds and modifies certain disclosure requirements for fair value measurements. Entities are no longer required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but public companies are required to disclose additional information about significant unobservable inputs for Level 3 measurements. The adoption of this ASU, effective January 1, 2020, did not have a material impact on the Company's consolidated financial statements.
Accounting Standards Not Yet Adopted
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU simplifies various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying and amending existing guidance to improve consistent application. The amendments in this ASU are effective for public entities for annual periods, and interim periods within those annual periods,

8

WPX Energy, Inc.
Notes to Consolidated Financial Statements — (Continued)
beginning after December 15, 2020. The Company is evaluating the impact of the adoption of ASU 2019-12 on its financial statements, but does not expect such adoption to have a material impact.
Note 2. Felix Acquisition
On December 15, 2019, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Felix Investments Holdings II, LLC (“Felix Parent”) to acquire all of the issued and outstanding membership interests of Felix (collectively, the “Felix Acquisition”), for consideration of approximately $2.5 billion (the “Unadjusted Purchase Price”), consisting of $900 million in cash (the “Unadjusted Cash Purchase Price”), and approximately 153 million unregistered shares of our common stock (the “Unadjusted Equity Consideration”) determined by dividing $1.6 billion by $10.46, the volume weighted average per share price of the Company for the ten consecutive trading days ending on December 13, 2019. The Unadjusted Purchase Price is subject to certain customary closing adjustments set forth in the Purchase Agreement. If certain closing adjustments are positive, the Unadjusted Cash Purchase Price is adjusted and if certain closing adjustments are negative, the Unadjusted Equity Consideration is adjusted. We completed the Felix Acquisition on March 6, 2020 (the “Acquisition Date”). The estimated fair value of the consideration was $1.933 billion, consisting of the estimated fair value of the 153 million shares of WPX common stock and approximately $939 million in cash. The consideration was subject to closing adjustments and the cash consideration was increased due to interim operations and working capital items. The closing adjustments are subject to change as closing estimates are finalized; however, we do not expect any material adjustments at this time. We have incurred approximately $30 million of acquisition-related costs, primarily related to legal and advisory fees which are reflected on a separate line item on the Consolidated Statements of Operations. WPX funded the cash consideration with proceeds from a debt offering in January 2020 along with available cash on hand and borrowings under our revolving credit facility. See Note 7 for further discussion on the financing of this transaction.
All of Felix's properties are located in the Delaware Basin and include approximately 58,000 net acres with six productive benches, with core operations located in Loving, Reeves, Ward and Winkler counties in Texas. As of closing, proved developed reserves were approximately 106 MMBoe.
The following table presents the unaudited pro forma financial results for the three months ended June 30, 2019 and six months ended June 30, 2020 and 2019 as if the Felix Acquisition and related financings had been completed January 1, 2019. In addition, the six months ended June 30, 2020 have been adjusted to exclude $30 million of acquisition-related costs. The unaudited pro forma financial information does not purport to be indicative of results of operations that would have occurred had the Felix Acquisition occurred on the date assumed or for the periods presented, nor is such information indicative of the Company's expected future results of operations.

Three months
ended June 30,
Six months
ended June 30,
201920202019
(Millions)
Revenues$867  $1,597  $1,356  
Net income (loss) from continuing operations attributable to WPX Energy, Inc.$350  $(547) $325  

The Felix Acquisition qualified as a business combination, and as a result, we must estimate the fair value of the underlying shares distributed as consideration, the assets acquired and the liabilities assumed as of the Acquisition Date. The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements also utilize assumptions of market participants. We will use a combination of market data and discounted cash flow models in determining the fair value of the oil and gas properties. The discounted cash flow models include estimates and assumptions representative of the economic conditions that existed at the Acquisition Date, such as future commodity prices, projections of estimated quantities of oil and natural gas reserves, expectations for timing and amount of future development and operating costs, projections of future rates of production, expected recovery rates and risk adjusted discount rates. These assumptions represent Level 3 inputs.

9

WPX Energy, Inc.
Notes to Consolidated Financial Statements — (Continued)
The initial accounting for the Felix Acquisition is preliminary and adjustments to provisional amounts for properties and equipment, certain accrued receivables and liabilities and related deferred taxes, if any, or recognition of additional assets acquired or liabilities assumed may occur as additional information is obtained about facts and circumstances that existed at the Acquisition Date. Such adjustments could result in the recognition of goodwill which would be subject to impairment review. We used a share price of $6.50 for our preliminary fair value of WPX common stock. The following table summarizes the consideration paid for the Felix Acquisition and the preliminary estimates of fair value of the assets acquired and liabilities assumed as of the Acquisition Date. We used several different pricing scenarios for future commodity prices and a range of risk-adjusted discount rates from 10 percent to 25 percent, which are subject to change. These amounts will be finalized as soon as possible, but no later than March 6, 2021.

Preliminary Purchase Price Allocation
(Millions)
Consideration:
Cash$939  
Fair value of WPX common stock994  
Total consideration$1,933  
Fair value of liabilities assumed:
Accounts payable$133  
Accrued liabilities7  
Asset retirement obligation7  
Total liabilities assumed $147  
Fair value of assets acquired:
Cash and cash equivalents$24  
Accounts receivable, net85  
Derivative assets, current121  
Other current and noncurrent assets5  
Properties and equipment1,845  
Total assets acquired$2,080  
Net fair value of assets and liabilities$1,933  

Note 3. Discontinued Operations
In first-quarter 2018, we sold our properties in the San Juan Gallup oil play. The purchaser assumed approximately $309 million of gathering and processing commitments that conclude in 2026; however, WPX left in place a performance guarantee with the gatherer with respect to these commitments. At the time of sale, we believed that any future performance under this guarantee obligation was unlikely. In first-quarter 2020, we were notified that the purchaser would not remit full payment of the deficiency due to the gatherer for the recently ended contract year. As a result, we recorded a $22 million accrual in first-quarter 2020 for the probable net amount of our portion of the deficiency payment. This payment was made in April 2020. The remaining commitment for future contract years through 2026 is approximately $231 million. In first-quarter 2020, we accrued an additional $162 million, related to our estimated potential exposure based on a probability-based cash flow for the remainder of the contract term. Of the $162 million, $126 million is included in other noncurrent liabilities and $36 million is included in accrued and other current liabilities on the Consolidated Balance Sheets as of June 30, 2020.  
Our discontinued operations also include accretion on certain transportation and gathering obligations retained and recognized in prior years associated with our exit from the Powder River Basin. Cash outflows related to previous accruals for the Powder River Basin gathering and transportation contracts retained by WPX were $13 million and $15 million for the six months ended June 30, 2020 and 2019, respectively.
See Note 9 for further discussion of indemnifications related to previously sold operations.

10

WPX Energy, Inc.
Notes to Consolidated Financial Statements — (Continued)
Note 4. Earnings (Loss) Per Common Share from Continuing Operations
The following table summarizes the calculation of earnings per share.
 Three months
ended June 30,
Six months
ended June 30,
 2020201920202019
 (Millions, except per-share amounts)
Income (loss) from continuing operations attributable to WPX Energy, Inc. common stockholders for basic and diluted earnings (loss) per common share
$(414) $305  $(622) $257  
Basic weighted-average shares559.7  422.5  508.8  421.8  
Effect of dilutive securities(a)  1.0    1.8  
Diluted weighted-average shares559.7  423.5  508.8  423.6  
Income (loss) per common share from continuing operations:
Basic$(0.74) $0.72  $(1.22) $0.61  
Diluted$(0.74) $0.72  $(1.22) $0.61  
__________
(a) Certain amounts of nonvested restricted stock units and awards and stock options are excluded from the computation of diluted earnings (loss) per common share as their inclusion would be antidilutive due to (i) a loss from continuing operations attributable to WPX Energy, Inc. common stockholders, or (ii) application of the treasury stock method to certain nonvested restricted stock units and awards. The excluded amounts are as follows:
Three months
ended June 30,
Six months
ended June 30,
2020201920202019
(Millions)
Weighted-average nonvested restricted stock units and awards
0.61.2
Shares subject to Felix Acquisition post-closing settlement (Note 11)
1.4Not
Applicable
0.9Not
Applicable
Nonvested restricted stock units and awards antidilutive under the treasury stock method
6.52.66.52.6

Note 5. Impairment, Equity Method Investment Transactions, Exploration Expenses and Other
Impairment of proved properties
As a result of the significant decline in forward crude prices, primarily driven by the current economic environment resulting from the COVID-19 pandemic during the first quarter of 2020, we performed impairment assessments of our proved properties in the Delaware and Williston Basins. As a result, we recorded a $967 million impairment of proved properties in the Williston Basin during the first quarter of 2020. Our impairment analyses and assessment included undiscounted and discounted future cash flows, as applicable, which considered information obtained from drilling, other activities and reserve quantities (see Note 12).
Equity Method Investment Transactions
During the first quarter of 2019, we closed on the sale of our 20 percent equity interest in the Whitewater natural gas pipeline. The net book value of this equity method investment at the time of disposition was approximately $15 million. As a result of this transaction, we recorded a $126 million gain in 2019.
During the second quarter of 2019, we received a distribution of approximately $357 million related to our 25 percent equity interest in the Oryx pipeline partnership after the underlying assets were sold. The net book value of this equity method investment was approximately $110 million as of the closing date. As a result of this transaction, we recorded a gain of $247 million in 2019.

11

WPX Energy, Inc.
Notes to Consolidated Financial Statements — (Continued)
Exploration Expenses
The following table presents a summary of exploration expenses.
 Three months
ended June 30,
Six months
ended June 30,
 2020201920202019
 (Millions)
Unproved leasehold property impairment and
     amortization
$18  $21  $83  $44  
Geologic and geophysical costs1  3  3  4  
Total exploration expenses$19  $24  $86  $48  
Included in unproved leasehold property impairment and amortization for the six months ended June 30, 2020, is an impairment of $49 million for unproved leasehold costs in in the Williston Basin associated with the impairment of the proved properties noted above.
Other
Commodity management expense for the six months ended June 30, 2020 includes a lower-of-cost or market adjustment related to long-term line fill, included in other noncurrent assets on the Consolidated Balance Sheet, of approximately $8 million.
Note 6. Inventories
The following table presents a summary of our inventories as of the dates indicated.
June 30,
2020
December 31,
2019
 (Millions)
Material, supplies and other $22  $36  
Commodity production in transit or storage5  5  
     Total inventories$27  $41  
During the first quarter of 2020, we recorded a lower-of-cost or market adjustment to material and supplies inventory of approximately $13 million which is reported in Other—net on the Consolidated Statement of Operations.
Note 7. Debt and Banking Arrangements
The following table presents a summary of our debt as of the dates indicated.
June 30,
2020
December 31,
2019
 (Millions)
Credit facility agreement$  $  
6.000% Senior Notes due 202273  73  
8.250% Senior Notes due 2023406  406  
5.250% Senior Notes due 2024647  650  
5.750% Senior Notes due 2026500  500  
5.250% Senior Notes due 2027600  600  
5.875% Senior Notes due 2028500    
4.500% Senior Notes due 2030900    
     Total debt$3,626  $2,229  
Less: Current portion of long-term debt, net369    
     Total long-term debt$3,257  $2,229  
Less: Debt issuance costs on long-term debt(a)47  27  
     Total long-term debt, net of debt issuance costs
$3,210  $2,202  
__________
(a)Debt issuance costs related to our Credit Facility are recorded in other noncurrent assets on the Consolidated Balance Sheets.

12

WPX Energy, Inc.
Notes to Consolidated Financial Statements — (Continued)
Credit Facility 
As of June 30, 2020, we had no borrowings outstanding and $18 million of letters of credit issued under the Credit Facility and we were in compliance with our financial covenants with full access to the Credit Facility.
In April 2020, our annual redetermination confirmed our Borrowing Base of $2.1 billion and total commitments of $1.5 billion that will remain in effect until the next Redetermination Date, which is expected to be in October 2020.
See our Annual Report on Form 10-K for the year ended December 31, 2019 for additional information on covenants related to our Credit Facility. As of the date of this filing, we are in compliance with all terms, conditions and financial covenants of the Credit Facility, as amended.
Senior Notes
On June 3, 2020, we completed a debt offering of $500 million of 5.875% Senior Notes due 2028 (the “2028 Notes”). The notes are senior unsecured obligations ranking equally with the Company’s other existing and future senior unsecured indebtedness. The 2028 Notes bear interest at a rate of 5.875% per annum and were priced at 100.0% of par. Interest is payable on notes semiannually in arrears on June 15 and December 15 of each year commencing on December 15, 2020. The 2028 Notes will mature on June 15, 2028. At any time prior to June 15, 2023, the Company may, on one or more occasions and subject to certain conditions described in the Indenture, redeem up to 35% of the aggregate principal amount of the Notes at a redemption price equal to 105.875% of the principal amount of the Notes redeemed with an amount of cash not greater than the net proceeds that the Company raises in certain equity offerings, as described in the Indenture. The Company also has the option, at any time prior to June 15, 2023, on one or more occasions, to redeem some or all of the Notes at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus a specified “make whole” premium as described in the Indenture. At any time on or after June 15, 2023, the Company may, on one or more occasions, redeem the Notes, in whole or in part, at the applicable redemption prices set forth in the Indenture. The Indenture contains covenants that, among other things, restrict the Company’s ability to grant liens on its assets and merge, consolidate or transfer or lease all or substantially all of its assets, subject to certain qualifications and exceptions. The net proceeds from the offering of the 2028 Notes were approximately $491 million and approximately $9 million of debt issuance costs were capitalized.
In conjunction with the offering of the 2028 Notes, we launched a tender offer for a portion of our 2022 Notes, 2023 Notes and 2024 Notes. On July 2, 2020, we closed on the purchase of $163.2 million aggregate principal amount for our 2023 Notes, $30.4 million aggregate principal amount for our 2022 Notes, and $175.0 million aggregate principal for our 2024 Notes through cash tender offers. The total principal of approximately $369 million is reflected as a current portion of long-term debt. Upon closing of the debt tender offers in July 2020, we will record an estimated $24 million loss on extinguishment of debt in third-quarter 2020.
On January 10, 2020, we completed a debt offering of $900 million aggregate principal amount of 4.50% Senior Notes due 2030 (the “2030 Notes”). The notes are senior unsecured obligations ranking equally with the Company’s other existing and future senior unsecured indebtedness. The 2030 Notes bear interest at a rate of 4.50% per annum and were priced at 100.0% of par. Interest is payable on the notes semiannually in arrears on January 15 and July 15 of each year commencing on July 15, 2020. The 2030 Notes will mature on January 15, 2030. At any time prior to January 15, 2023, the Company may, on one or more occasions and subject to certain conditions described in the Indenture, redeem up to 35% of the aggregate principal amount of the Notes at a redemption price equal to 104.5% of the principal amount of the Notes redeemed with an amount of cash not greater than the net proceeds that the Company raises in certain equity offerings, as described in the Indenture. The Company also has the option, at any time prior to January 15, 2025, on one or more occasions, to redeem some or all of the Notes at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus a specified “make whole” premium as described in the Indenture. At any time on or after January 15, 2025, the Company may, on one or more occasions, redeem the Notes, in whole or in part, at the applicable redemption prices set forth in the Indenture. The Indenture contains covenants that, among other things, restrict the Company’s ability to grant liens on its assets and merge, consolidate or transfer or lease all or substantially all of its assets, subject to certain qualifications and exceptions. The net proceeds from the offering of the 2030 Notes were approximately $886 million and approximately $14 million of debt issuance costs were capitalized. The net proceeds from this offering were used to fund a portion of the Felix Acquisition.
See our Annual Report on Form 10-K for the year ended December 31, 2019 for additional discussion related to our other senior notes.

13

WPX Energy, Inc.
Notes to Consolidated Financial Statements — (Continued)
Note 8. Provision (Benefit) for Income Taxes
The following table presents the provision (benefit) for income taxes from continuing operations. 
 Three months
ended June 30,
Six months
ended June 30,
 2020201920202019
 (Millions)
Current:
Federal$(1) $  $(20) $  
State  2    1  
(1) 2  (20) 1  
Deferred:
Federal(90) 75  (120) 63  
State(10) 7  (22) 6  
(100) 82  (142) 69  
Total provision (benefit)$(101) $84  $(162) $70  

On March 27, 2020, the President of the United States signed into law the Coronavirus Aid, Relief, and Economic Security Act, H.R. 748 (“CARES Act”). The CARES Act includes modifications to the Internal Revenue Code (“IRC”) intended to provide economic relief to those impacted by the COVID-19 pandemic such as allowing taxpayers to accelerate the remaining balance of alternative minimum tax (“AMT”) credit carryforwards. The income tax effects of changes in tax laws are recognized in the period enacted. As a result, the Company has a current receivable of $38 million as of June 30, 2020 for all our remaining AMT credit refunds which are expected to be collected in 2020. However, our AMT credits are subject to change based on the results of the 2011 Williams audit as discussed below and may impact our refunds already received.
The effective income tax rate for the three months ended June 30, 2020, differs from the federal statutory rate of 21 percent due to the effect of equity-based compensation and valuation allowances placed on estimated federal and state net operating loss (“NOL”) carryovers, partially offset by state income taxes.
The effective income tax rate for the three months ended June 30, 2019, differs from the federal statutory rate of 21 percent due to the effect of state income taxes and equity-based compensation, partially offset by the reversal of the valuation allowance on capital loss carryovers resulting from the capital gain from the 2019 transactions involving an equity interest in a partnership.
The effective income tax rate for the six months ended June 30, 2020, differs from the federal statutory rate of 21 percent due to the effect of equity-based compensation and valuation allowances placed on estimated federal and state NOL carryovers, partially offset by state income taxes.
The effective income tax rate for the six months ended June 30, 2019, differs from the federal statutory rate of 21 percent due to the effect of state income taxes and equity-based compensation, partially offset by the reversal of the valuation allowance on capital loss carryovers resulting from the capital gains from the 2019 transactions involving equity interests in partnerships.
We have recorded valuation allowances against deferred tax assets attributable to federal and state NOL carryovers. When assessing the need for a valuation allowance, we primarily consider future reversals of existing taxable temporary differences. To a lesser extent we may also consider future taxable income exclusive of reversing temporary differences and carryovers, and tax-planning strategies that would, if necessary, be implemented to accelerate taxable amounts to utilize expiring carryovers. The ultimate amount of deferred tax assets realized could be materially different from those recorded, as influenced by future operational performance, potential changes in jurisdictional income tax laws and other circumstances surrounding the actual realization of related tax assets. Valuation allowances that we have recorded are due to our expectation that we will not have sufficient income, or income of a sufficient character, in those jurisdictions to which the associated deferred tax asset applies. Additional valuation allowances against our NOL carryovers may be required in future periods if additional losses are incurred or other circumstances change.
The ability of WPX to utilize NOL carryovers to reduce future federal taxable income could be subject to limitations under the IRC. The utilization of such carryovers may be limited upon the occurrence of certain ownership changes during any three-year period resulting in an aggregate change of more than 50 percent in beneficial ownership (an “Ownership Change”). As of June 30, 2020, we do not believe that an Ownership Change has occurred for WPX, but an Ownership Change did occur for the

14

WPX Energy, Inc.
Notes to Consolidated Financial Statements — (Continued)
company we acquired in 2015 (“RKI”). Therefore, there is an annual limitation on the benefit that WPX can claim from RKI carryovers that arose prior to the acquisition.
Pursuant to our tax sharing agreement with The Williams Companies, Inc. (“Williams”), we remain responsible for the tax from audit adjustments related to our business for periods prior to our spin-off from Williams on December 31, 2011. The 2011 consolidated tax filing by Williams is currently being audited by the IRS and is the only pre-spin-off period for which we continue to have exposure to audit adjustments as part of Williams. The IRS has proposed an adjustment related to our business for which a payment to Williams could be required. We have evaluated the issue and are in the process of protesting the adjustment within the normal appeals process of the IRS. In addition, the AMT credit carryforward deferred tax asset that was allocated to us by Williams at the time of the spin-off could change due to audit adjustments unrelated to our business. Any such adjustments to this allocated deferred tax asset will not be known until the IRS examination is completed but is not expected to result in a cash settlement with Williams. However, if the Company has to amend filed returns whereby refunds of AMT credit carryforwards have been received, the Company may have to remit cash to the IRS. Through June 30, 2020, we have received $50 million related to these AMT credit carryforwards.
As of June 30, 2020, the Company has approximately $9 million of unrecognized tax benefits which is offset by an increase in deferred tax assets of approximately $5 million. Currently, we do not expect ultimate resolution of our uncertain tax position during the next 12 months.
Note 9. Contingent Liabilities and Commitments
Contingent Liabilities
Federal gas royalties
Other producers have been pursuing administrative appeals with a federal regulatory agency and have been in discussions with a state agency in New Mexico regarding certain deductions, comprised primarily of processing, treating and transportation costs, used in the calculation of royalties. Although we are not a party to those matters, we are monitoring them to evaluate whether their resolution might have the potential for unfavorable impact on our results of operations. Certain outstanding issues in those matters could be material to us. We received notice from the U.S. Department of Interior Office of Natural Resources Revenue (“ONRR”) in the fourth quarter of 2010, intending to clarify the guidelines for calculating federal royalties on conventional gas production applicable to many of our federal leases in New Mexico. The guidelines for New Mexico properties were revised slightly in September 2013 as a result of additional work performed by the ONRR. The revisions did not change the basic function of the original guidance. The ONRR’s guidance provides its view as to how much of a producer’s bundled fees for transportation and processing can be deducted from the royalty payment. We believe using these guidelines would not result in a material difference in determining our historical federal royalty payments for our leases in New Mexico. Similar guidelines were subsequently issued for certain leases in Colorado and, as in the case of the New Mexico guidelines, we do not believe that they will result in a material difference to our historical federal royalty payments. ONRR has asked producers to attempt to evaluate the deductibility of these fees directly with the midstream companies that transport and process gas.
Environmental matters
The EPA, other federal agencies, and various state and local regulatory agencies and jurisdictions routinely promulgate and propose new rules, and issue updated guidance to existing rules. These new rules and rulemakings include, but are not limited to, new air quality standards for ground level ozone, methane, green completions, and hydraulic fracturing and water standards. We are unable to estimate the costs of asset additions or modifications necessary to comply with these new regulations due to uncertainty created by the various legal challenges to these regulations and the need for further specific regulatory guidance.
Matters related to Williams’ former power business
In connection with a Separation and Distribution Agreement between WPX and Williams, Williams is obligated to indemnify and hold us harmless from any losses arising out of liabilities assumed by us for the pending litigation described below relating to the reporting of certain natural gas-related information to trade publications.
Civil suits based on allegations of manipulating published gas price indices have been brought against us and others, seeking unspecified amounts of damages. We are currently a defendant in class action litigation and other litigation originally filed in state court in Colorado, Kansas, Missouri and Wisconsin and brought on behalf of direct and indirect purchasers of natural gas in those states. These cases were transferred to the federal court in Nevada. In 2008, the court granted summary judgment in the Colorado case in favor of us and most of the other defendants based on plaintiffs’ lack of standing. On January 8, 2009, the court denied the plaintiffs’ request for reconsideration of the Colorado dismissal and entered judgment in our favor.

15

WPX Energy, Inc.
Notes to Consolidated Financial Statements — (Continued)
On August 6, 2018, the Ninth Circuit reversed the orders denying class certification and remanded to the MDL Court. On September 7, 2018, those plaintiffs filed a motion seeking remand to the originally filed district courts of Missouri, Kansas and Wisconsin. In February 2019, settlement agreements with the Kansas and Missouri class claimants were executed, and on August 5, 2019, after the final fairness hearing, the court approved the settlement and entered final judgment. In the Wisconsin putative class action, the case was remanded to its originally filed court of the Western District of Wisconsin for trial.
In the other cases, on July 18, 2011, the Nevada district court granted our joint motions for summary judgment to preclude the plaintiffs’ state law claims because the federal Natural Gas Act gives the Federal Energy Regulatory Commission exclusive jurisdiction to resolve those issues. The court also denied the plaintiffs’ class certification motion as moot. The plaintiffs appealed to the United States Court of Appeals for the Ninth Circuit. On April 10, 2013, the United States Court of Appeals for the Ninth Circuit issued its opinion in the In re: Western States Wholesale Antitrust Litigation, holding that the Natural Gas Act does not preempt the plaintiffs’ state antitrust claims and reversing the summary judgment previously entered in favor of the defendants. The U.S. Supreme Court granted Defendants’ writ of certiorari. On April 21, 2015, the U.S. Supreme Court determined that the state antitrust claims are not preempted by the federal Natural Gas Act. On March 7, 2016, the putative class plaintiffs in several of the cases filed their motions for class certification. On March 30, 2017, the court denied the motions for class certification, which decision was appealed on June 20, 2017. On May 24, 2016, in Reorganized FLI Inc. v. Williams Companies, Inc., the Court granted Defendants’ Motion for Summary Judgment in its entirety, and an agreed amended judgment was entered by the court on January 4, 2017. Reorganized FLI, Inc. appealed this decision and on March 27, 2018, the 9th Circuit Court of Appeals reversed and remanded the case to the MDL Court. In May 2019, the MDL Court remanded the case back to Kansas District Court. On December 30, 2019, Defendants petitioned the United States Court of Appeals for the Tenth Circuit to consider their motion for appeal of their motion to reconsider the denial of their motion for summary judgement and the Tenth Circuit granted the petition. Because of the uncertainty around pending unresolved issues, including an insufficient description of the purported classes and other related matters, we cannot reasonably estimate a range of potential exposure at this time.
Other Indemnifications
Pursuant to various purchase and sale agreements relating to divested businesses and assets, including the agreements pursuant to which we divested our Piceance and San Juan Basin operations, we have indemnified certain purchasers against liabilities that they may incur with respect to the businesses and assets acquired from us. The indemnities provided to the purchasers are customary in sale transactions and are contingent upon the purchasers incurring liabilities that are not otherwise recoverable from third parties. The indemnities generally relate to breaches of representations and warranties, tax liabilities, historic litigation, personal injury, environmental matters and rights-of-way. Additionally, Federal and state laws in areas of former operations may require previous operators to perform in certain circumstances where the buyer/operator may no longer be able to perform. Such duties may include plugging and abandoning wells or responsibility for surface agreements in existence at the time of disposition.
The current owner/operator of properties we divested in the Powder River Basin filed for bankruptcy during the fourth quarter of 2019, and it is uncertain to what extent the current owner/operator will perform its obligations with respect to such properties. Prior to our disposition of such properties, payments under the surface use agreements were approximately $6 million annually and our recorded asset retirement obligation under GAAP related to the plugging and abandoning of wells was approximately $46 million.
The indemnity provided to the purchaser of the entity that held our Piceance Basin operations relates in substantial part to liabilities arising in connection with litigation over the appropriate calculation of royalty payments. Plaintiffs in litigation have asserted claims regarding, among other things, the method by which we accounted for transportation costs when calculating royalty payments. In 2017, we settled one of these claims. In February 2019, a royalty-interest owner in Garfield County, filed a putative class action in the District Court of Colorado, Garfield County (State Case), alleging that we breached certain oil and gas leases and overriding royalty agreements by deducting gathering and fuel costs associated with the transportation and processing of gas from royalty and overriding royalty payments since 2011. The royalty-interest owner seeks to represent a class of owners that have interests in leases stating that we can deduct the cost of transporting gas from the well to point of sale. The same royalty-interest owner also filed a putative class action in the United States District Court of Colorado (Federal Case), seeking to represent a class of all royalty owners except tribal and governmental owners, alleging that we breached express and implied duties set forth in oil and gas leases and overriding royalty agreements by underpaying royalties and overriding royalties since July 2011 by failing to "enhance" the value of gas through processing, by deducting unreasonably high transportation costs for residue gas, by failing to prudently market residue gas and NGLs and by failing to pay royalties on the highest obtainable price. At this time, we believe that our royalty calculations have been properly determined in accordance with the appropriate contractual arrangements and applicable laws. We do not have sufficient information to calculate a reasonable estimated range of exposure related to these claims.

16

WPX Energy, Inc.
Notes to Consolidated Financial Statements — (Continued)
In connection with the sale of our San Juan Basin assets in the first quarter of 2018, we left in place and remained subject to a performance guarantee with respect to various gathering and processing commitments. See Note 3 for a discussion of accruals we have recorded in connection with this performance guarantee.
In connection with the separation from Williams, we agreed to indemnify and hold Williams harmless from any losses resulting from the operation of our business or arising out of liabilities assumed by us. Similarly, Williams has agreed to indemnify and hold us harmless from any losses resulting from the operation of its business or arising out of liabilities assumed by it.
Summary
As of June 30, 2020 and December 31, 2019, the Company had accrued approximately $7 million and $10 million, respectively, for loss contingencies associated with royalty litigation and other contingencies, excluding the performance guarantee. In certain circumstances, we may be eligible for insurance recoveries, or reimbursement from others. Any such recoveries or reimbursements will be recognized only when realizable.
Management, including internal counsel, currently believes that the ultimate resolution of the foregoing matters, taken as a whole and after consideration of amounts accrued, insurance coverage, recovery from customers or other indemnification arrangements, is not expected to have a materially adverse effect upon our future liquidity or financial position; however, it could be material to our results of operations in any given year.
Commitments
During the first quarter of 2020, a counterparty completed construction for a project in the Delaware Basin, which is associated with our commitment to use crude transportation capacity totaling approximately $102 million over a 7 year term beginning in 2020.
Note 10. Leases
Our contracts that are leases or contain leases primarily relate to drilling rigs, compression units and office space. Leases are recorded on the balance sheet when the lease term exceeds one year and we direct the use of an identified asset while receiving substantially all of the economic benefit of the asset. Right-of-use assets are included in other noncurrent assets on the Consolidated Balance Sheet. Lease liabilities are included in accrued and other current liabilities and other noncurrent liabilities on the Consolidated Balance Sheet. During the first half of 2020, we added right of use assets of approximately $31 million in exchange for new operating lease liabilities primarily related to a new rig agreement added in first-quarter 2020.
Note 11. Stockholders' Equity
Share Repurchase Program
On August 5, 2019, we announced that our Board of Directors authorized a plan to repurchase up to $400 million of our outstanding shares over a 24-month period. Under the share repurchase program, we may repurchase shares at management’s discretion in accordance with applicable securities laws, including through open-market transactions, privately negotiated transactions or any combination thereof. The amount and timing of repurchases are subject to a number of factors, including stock price, trading volume, general market conditions, legal requirements, general business conditions and corporate considerations determined by WPX’s management, such as liquidity and capital needs. This share repurchase program may be modified, suspended or terminated at any time by our Board of Directors. As of June 30, 2020, we have repurchased approximately 16.1 million shares under the program at an average price of $6.30 per share including 10.4 million shares during first-quarter 2020 at an average price of $4.18 per share.
Felix Acquisition
Part of the consideration for our acquisition of Felix that closed on March 6, 2020, included approximately 153 million shares of our common stock (1.4 million of which are subject to post-closing settlement). In addition, we added two new board members to our Board of Directors. See Note 2 for additional discussion of the Felix Acquisition.

17

WPX Energy, Inc.
Notes to Consolidated Financial Statements — (Continued)
Note 12. Fair Value Measurements
Recurring
The following table presents, by level within the fair value hierarchy, our assets and liabilities that are measured at fair value on a recurring basis. The carrying amounts reported in the Consolidated Balance Sheets for cash and cash equivalents and restricted cash approximate fair value due to the nature of the instrument and/or the short-term maturity of these instruments.
 June 30, 2020December 31, 2019
 Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
 (Millions)(Millions)
Energy derivative assets$  $379  $  $379  $  $67  $  $67  
Energy derivative liabilities$  $141  $  $141  $  $91  $  $91  
Total debt(a)$  $3,480  $  $3,480  $  $2,400  $  $2,400  
__________
(a)The carrying value of total debt, excluding debt issuance costs, was $3,626 million and $2,229 million as of June 30, 2020 and December 31, 2019, respectively. The fair value of our debt, which also excludes debt issuance costs, is determined on market rates and the prices of similar securities with similar terms and credit ratings.
Energy derivatives include commodity-based exchange-traded contracts and over-the-counter (“OTC”) contracts. Exchange-traded contracts include futures, swaps and options. OTC contracts may include forwards, swaps, options or swaptions. These are carried at fair value on the Consolidated Balance Sheets.
Many contracts have bid and ask prices that can be observed in the market. Our policy is to use a mid-market pricing (the mid-point price between bid and ask prices) convention to value individual positions and then adjust on a portfolio level to a point within the bid and ask range that represents our best estimate of fair value. For offsetting positions by location, the mid-market price is used to measure both the long and short positions.
The determination of fair value for our derivative assets and liabilities also incorporates the time value of money and various credit risk factors which can include the credit standing of the counterparties involved, master netting arrangements, the impact of credit enhancements (such as cash collateral posted and letters of credit) and our nonperformance risk on our liabilities. The determination of the fair value of our derivative liabilities does not consider noncash collateral credit enhancements.
Forward, swap, option and swaption contracts are considered Level 2 and are valued using an income approach including present value techniques and option pricing models. Option contracts, which hedge future sales of our production, are structured as calls, costless collars or swaptions and are financially settled. All of our financial options are valued using an industry standard Black-Scholes option pricing model. In connection with swaps, we may sell call options or swaptions to the swap counterparties in exchange for receiving premium hedge prices on the swaps. The sold calls or swaptions establish a maximum price we will receive for the volumes under contract and are financially settled. Significant inputs into our Level 2 valuations include commodity prices, implied volatility and interest rates, as well as considering executed transactions or broker quotes corroborated by other market data. These broker quotes are based on observable market prices at which transactions could currently be executed. In certain instances where these inputs are not observable for all periods, relationships of observable market data and historical observations are used as a means to estimate fair value. Also categorized as Level 2 is the fair value of our debt, which is determined on market rates and the prices of similar securities with similar terms and credit ratings. Where observable inputs are available for substantially the full term of the asset or liability, the instrument is categorized in Level 2.
Our energy derivatives portfolio is largely comprised of over-the-counter products or like products and the tenure of our derivatives portfolio extends through the end of 2024. Due to the nature of the products and tenure, we are consistently able to obtain market pricing. All pricing is reviewed on a daily basis and is formally validated with broker quotes or market indications and documented on a quarterly basis.
Certain instruments trade with lower availability of pricing information. These instruments are valued with a present value technique using inputs that may not be readily observable or corroborated by other market data. These instruments are classified within Level 3 when these inputs have a significant impact on the measurement of fair value. We had less than $1 million of instruments included in Level 3 as of June 30, 2020 and December 31, 2019.
Reclassifications of fair value between Level 1, Level 2 and Level 3 of the fair value hierarchy, if applicable, are made at the end of each quarter. No significant transfers occurred during the periods ended June 30, 2020 and 2019.

18

WPX Energy, Inc.
Notes to Consolidated Financial Statements — (Continued)
There have been no material changes in the fair value of our net energy derivatives and other assets classified as Level 3 in the fair value hierarchy.
Nonrecurring
As previously noted, we evaluate our long-lived assets for impairment when events or changes in circumstances indicate, in our management’s judgment, that the carrying value of such assets may not be recoverable. The events towards the end of the first quarter, including the significant declines in crude oil prices for 2020, were potential indicators of impairment. Therefore, we performed an assessment of our proved properties at the end of the first quarter.
Our assessment utilized several estimates of future cash flows including scenarios at forecasted prices and at forward market prices. Significant judgments and assumptions in these assessments include estimates of proved, probable and possible reserve quantities, estimates of future commodity prices (developed in consideration of market information, internal forecasts and published forward prices adjusted for locational basis differentials), drilling plans, expected capital costs and an applicable discount rate commensurate with the risk of the underlying cash flow estimates.
Our assessment identified the Williston properties with a carrying value in excess of estimated undiscounted cash flows and as a result, we recorded impairment charges to reduce the net book value of the Williston proved and unproved properties to a probability-weighted estimated fair value totaling approximately $1.0 billion measured on a nonrecurring basis within Level 3 of the fair value hierarchy. This included proved reserves quantities of more than 147 million barrels of oil equivalent, forecasted weighted-average prices averaging approximately $50.84 per Bbl for crude (adjusted for locational differences), forward market weighted-average prices averaging approximately $38.72 per Bbl and an after-tax discount rates ranging from 10 percent to 15 percent commensurate with the proved developed, proved undeveloped and probable reserves. Additional declines in forecasted prices from March 31, 2020 could result in additional impairment assessments in future quarters on our long-lived assets.
During the second quarter of 2020, we participated in an exchange of leasehold in the Permian Basin. In conjunction with this exchange of leasehold, which included both proved and unproved leasehold, we estimated the fair value of the leasehold through discounted cash flow models and consideration of market data. Our estimates and assumptions included future commodity prices, projection of estimated quantities of oil and natural gas reserves, expectations for future development and operating costs and risk adjusted discount rates, all of which are Level 3 inputs. In conjunction with the exchange, we recognized a gain of approximately $5 million which is included in other (income) expense—net on the Consolidated Statement of Operations.
Note 13. Derivatives and Concentration of Credit Risk
Energy Commodity Derivatives
Risk Management Activities
We are exposed to market risk from changes in energy commodity prices within our operations. We utilize derivatives to manage exposure to the variability in expected future cash flows from forecasted sales of crude oil, natural gas and natural gas liquids attributable to commodity price risk.
We produce, buy and sell crude oil, natural gas and natural gas liquids at different locations throughout the United States. To reduce exposure to a decrease in revenues from fluctuations in commodity market prices, we enter into futures contracts, swap agreements and financial option contracts to mitigate the price risk on forecasted sales of crude oil, natural gas and natural gas liquids. We have also entered into basis swap agreements to reduce the locational price risk associated with our producing basins. Our financial option contracts are either purchased or sold options, or a combination of options that comprise a net purchased option, zero-cost collar or swaption.

19

WPX Energy, Inc.
Notes to Consolidated Financial Statements — (Continued)
Derivatives related to production
The following table sets forth the derivative notional volumes of the net long (short) positions that are economic hedges of production volumes, which are included in our commodity derivatives portfolio as of June 30, 2020.
CommodityPeriodContract Type (a)LocationNotional Volume (b)Weighted Average
Price (c)
Crude Oil
Crude OilJul - Dec 2020Fixed Price SwapsWTI(91,800) $53.06  
Crude OilJul - Dec 2020Basis SwapsMidland/Cushing(35,000) $0.63  
Crude OilJul - Dec 2020Basis SwapsNymex CMA Roll(51,685) $(0.50) 
Crude OilJul - Dec 2020Basis SwapsBrent/WTI Spread(5,000) $8.36  
Crude OilJul - Dec 2020Fixed Price CollarsWTI(20,000) $53.33 - $63.48
Crude OilJul - Dec 2020Basis SwapsMEH/Midland(842) $0.85  
Crude Oil2021Fixed Price SwapWTI(54,919) $40.61  
Crude Oil2021Fixed Price SwaptionsWTI(5,041) $40.12  
Crude Oil2021Fixed Price SwaptionsWTI(20,000) $57.02  
Crude Oil2021Fixed Price CallsWTI(5,000) $39.50  
Crude Oil2021Basis SwapsBrent/WTI Spread(1,000) $8.00  
Crude Oil2021Basis SwapsMidland/Cushing(15,000) $0.64  
Crude Oil2022Fixed Price SwaptionsWTI(5,493) $44.71  
Crude Oil2022Basis SwapsBrent/WTI Spread(1,000) $7.75  
Natural Gas
Natural GasJul - Dec 2020Basis SwapsWaha(100) $(1.14) 
Natural Gas2021Fixed Price SwapsHenry Hub(240) $2.62  
Natural Gas2021Fixed Price CallsHenry Hub(50) $2.57  
Natural Gas2021Basis SwapsWaha(80) $(0.65) 
Natural Gas2022Fixed Price SwaptionsHenry Hub(100) $2.70  
Natural Gas2022Basis SwapsWaha(70) $(0.57) 
Natural Gas2023Basis SwapsWaha(70) $(0.51) 
Natural Gas2024Basis SwapsWaha(40) $(0.51) 
Physical Derivatives
Natural GasJul - Dec 2020IndexHSC(4) N/A
Natural Gas2021IndexHSC(4) N/A
__________
(a)Derivatives related to crude oil production are fixed price swaps settled on the business day average, basis swaps, fixed price calls, collars or swaptions. The derivatives related to natural gas production are fixed price swaps, basis swaps, fixed price calls or swaptions. In connection with swaps, we may sell call options or swaptions to the swap counterparties in exchange for receiving premium hedge prices on the swaps. The sold call or swaption establishes a maximum price we will receive for the volumes under contract and are financially settled. Basis swaps for the Nymex CMA (Calendar Monthly Average) Roll location are pricing adjustments to the trade month versus the delivery month for contract pricing. Basis swaps for the Brent/WTI location are priced off the Brent and WTI futures spread.
(b)Crude oil volumes are reported in Bbl/day and natural gas volumes are reported in BBtu/day.
(c)The weighted average price for crude oil is reported in $/Bbl and natural gas is reported in $/MMBtu.

Fair values and gains (losses)
Our derivatives are presented as separate line items in our Consolidated Balance Sheets as current and noncurrent derivative assets and liabilities. Derivatives are classified as current or noncurrent based on the contractual timing of expected future net cash flows of individual contracts. The expected future net cash flows for derivatives classified as current are expected to occur within the next 12 months. The fair value amounts are presented on a gross basis and do not reflect the netting of asset and liability positions permitted under the terms of our master netting arrangements. Further, the amounts below do not include cash held on deposit in margin accounts that we have received or remitted to collateralize certain derivative positions.

20

WPX Energy, Inc.
Notes to Consolidated Financial Statements — (Continued)
We enter into commodity derivative contracts that serve as economic hedges but are not designated as cash flow hedges for accounting purposes as we do not utilize this method of accounting for derivative instruments. Net gain (loss) on derivatives on the Consolidated Statements of Operations includes net settlements received of $337 million and $454 million for the three and six months ended June 30, 2020, respectively, and net settlements paid of $10 million and $1 million for the three and six months ended June 30, 2019, respectively.
The cash flow impact of our derivative activities is presented as separate line items within the operating activities on the Consolidated Statements of Cash Flows.
Offsetting of derivative assets and liabilities
The following table presents our gross and net derivative assets and liabilities.
Gross Amount Presented on Balance SheetNetting Adjustments (a)Net Amount
June 30, 2020(Millions)
Derivative assets with right of offset or master netting agreements
$379  $(125) $254  
Derivative liabilities with right of offset or master netting agreements
$(141) $125  $(16) 
December 31, 2019
Derivative assets with right of offset or master netting agreements
$67  $(45) $22  
Derivative liabilities with right of offset or master netting agreements
$(91) $45  $(46) 
__________
(a)With all of our financial trading counterparties, we have agreements in place that allow for the financial right of offset for derivative assets and derivative liabilities at settlement or in the event of a default under the agreements. Additionally, we have negotiated master netting agreements with some of our counterparties. These master netting agreements allow multiple entities that have multiple underlying agreements the ability to net derivative assets and derivative liabilities at settlement or in the event of a default or a termination under one or more of the underlying contracts.
Credit-risk-related features
Certain of our derivative contracts contain credit-risk-related provisions that would require us, under certain events, to post additional collateral in support of our net derivative liability positions. These credit-risk-related provisions require us to post collateral in the form of cash or letters of credit when our net liability positions exceed an established credit threshold. The credit thresholds are typically based on our senior unsecured debt ratings from Standard and Poor’s and/or Moody’s Investment Services. Under these contracts, a credit ratings decline would lower our credit thresholds, thus requiring us to post additional collateral. We also have contracts that contain adequate assurance provisions giving the counterparty the right to request collateral in an amount that corresponds to the outstanding net liability.
As of June 30, 2020, we had no collateral posted to derivative counterparties to support the aggregate fair value of our net $16 million derivative liability position (reflecting master netting arrangements in place with certain counterparties), which includes a reduction of less than $1 million to our liability balance for our own nonperformance risk. Assuming our credit thresholds were eliminated and a call for adequate assurance under the credit risk provisions in our derivative contracts was triggered, the additional collateral that we would have been required to post at June 30, 2020 was $16 million. 
Concentration of Credit Risk
Cash equivalents
Our cash equivalents are primarily invested in funds with high-quality, short-term securities and instruments that are issued or guaranteed by the U.S. government.
Accounts receivable
Accounts receivable are carried on a gross basis, with no discounting, less the allowance for credit losses. We estimate the allowance for credit losses based on historic write offs, existing and reasonable forecasted economic conditions, the financial conditions and available credit ratings of the customers and the amount and age of past due accounts. Receivables are considered past due if full payment is not received by the contractual due date. Past due accounts are generally written off against the allowance for credit losses only after all collection attempts have been exhausted. A portion of our receivables are from joint interest owners of properties we operate. Thus, we may have the ability to withhold future revenue disbursements to recover any non-payment of joint interest billings.

21

WPX Energy, Inc.
Notes to Consolidated Financial Statements — (Continued)
Derivative assets and liabilities
We have a risk of loss from derivative counterparties not performing pursuant to the terms of their contractual obligations. Counterparty performance can be influenced by changes in the economy and regulatory issues, among other factors. Risk of loss is impacted by several factors, including credit considerations and the regulatory environment in which a counterparty transacts. We attempt to minimize credit-risk exposure to derivative counterparties and brokers through formal credit policies, consideration of credit ratings from public ratings agencies, monitoring procedures, master netting agreements and collateral support under certain circumstances. Collateral support could include letters of credit, payment under margin agreements and guarantees of payment by credit worthy parties.
We also enter into master netting agreements to mitigate counterparty performance and credit risk. During 2020 and 2019, we did not incur any significant losses due to counterparty bankruptcy filings. We assess our credit exposure on a net basis to reflect master netting agreements in place with certain counterparties. We offset our credit exposure to each counterparty with amounts we owe the counterparty under derivative contracts.
Our gross and net credit exposure from our derivative contracts were $379 million and $254 million, respectively, as of June 30, 2020. All of our credit exposure is with investment grade financial institutions. We determine investment grade primarily using publicly available credit ratings. We include counterparties with a minimum S&P’s rating of BBB- or Moody’s Investors Service rating of Baa3 to be investment grade.
Our seven largest net counterparty positions represent approximately 90 percent of our net credit exposure. Under our marginless hedging agreements with key banks, neither party is required to provide collateral support related to hedging activities.
Other
Collateral support for our commodity agreements could include margin deposits, letters of credit, surety bonds and guarantees of payment by credit worthy parties.
One of our senior officers is on the board of directors of NGL Energy Partners, LP (“NGL Energy”). In the normal course of business, we sell crude oil to NGL Energy. For the first six months of 2020, sales to NGL Energy were approximately 13 percent of our total consolidated revenues adjusted for gain (loss) on derivatives. In addition, a subsidiary of NGL Energy provides water disposal services for WPX that represent approximately 1 percent of operating expenses.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
General
The following discussion should be read in conjunction with the selected historical consolidated financial data and the consolidated financial statements and the related notes included elsewhere in this Form 10-Q and our 2019 Annual Report on Form 10-K. The matters discussed below may contain forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this Form 10-Q and our 2019 Annual Report on Form 10-K.
Unless indicated otherwise, the following discussion relates to continuing operations. See Note 3 of Notes to Consolidated Financial Statements for a discussion of discontinued operations.
Overview
Composition of production (based on MBoe) and product revenue
Three and six months ended June 30,
ProductionProduct Revenue
https://cdn.kscope.io/7298d143eb0edb1d5432cf68d03c00f1-wpx-20200630_g2.jpg
The following table presents our production volumes and financial highlights for the three and six months ended June 30, 2020 and 2019:
 Three months
ended June 30,
Six months
ended June 30,
 2020201920202019
Production Sales Volume Data:Per dayPer dayPer dayPer day
Oil (MBbls)11,259123.78,90597.9  22,381123.017,55297  
Natural gas (MMcf)26,116287.018,736205.9  48,328265.536,947204.1  
NGLs (MBbls)3,22235.42,49327.4  6,32034.74,78126.4  
Combined equivalent volumes (MBoe)(a)18,834  207.014,520  159.6  36,755  201.9  28,491  157.4  
Financial Data (millions):
Total product revenues$274  $558  $776  $1,065  
Total revenues(b)$33  $695  $1,431  $1,054  
Operating income (loss)$(471) $181  $(697) $32  
Capital expenditure activity$188  $341  $501  $766  
 __________
(a)MBoe are calculated using the ratio of six Mcf to one barrel of oil.
(b)Includes net gain (loss) on derivatives.


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Our second-quarter 2020 operating results were $652 million unfavorable compared to second-quarter 2019. The primary items impacting the three months ended June 30, 2020 compared to the same period in 2019 include:
$435 million decrease in product revenues due to lower commodity prices;
$353 million unfavorable change in net gain (loss) on derivatives; and
$17 million higher operating costs including depreciation, depletion and amortization, lease and facility, gathering, processing and transportation, and taxes other than income.
Offset by:
$151 million increase in product revenues due to higher overall production volumes primarily due to the Felix Acquisition.
Our year-to-date 2020 operating results were $729 million unfavorable compared to 2019. The primary items impacting the six months ended June 30, 2020 compared to the same period in 2019 include:
$1 billion impairments in 2020 on our Williston Basin; $967 million of which related to proved properties reported in impairment expense and $49 million of which related to unproved leasehold impairment reported in exploration expenses;
$586 million decrease in product revenues due to lower commodity prices;
$95 million higher operating costs including depreciation, depletion and amortization, lease and facility, gathering, processing and transportation, and taxes other than income; and
$30 million of acquisition costs for the Felix Acquisition in 2020.
Offset by:
$723 million favorable change in net gain (loss) on derivatives; and
$297 million increase in product revenues related to higher overall production volumes due to the Felix Acquisition.
Outlook
During the first quarter of 2020, oil prices deteriorated due to a softening of global demand caused by the COVID-19 (Coronavirus) pandemic and were highly volatile following actions of OPEC+ countries to relax or eliminate their production quotas and then agree to production quotas. With a modest increase in worldwide demand and production cuts across the globe, oil prices have improved since the lows seen in April and May. They remain volatile as the COVID-19 pandemic continues. Additionally, a recent court ruling in the United States on the Dakota Access Pipeline (“DAPL”), if not stayed, will most likely impact the production and transportation costs of crude from the Williston Basin in North Dakota. We are taking measures to mitigate our exposure to Williston basis differentials including negotiating contracts for other pipeline capacity and sales via rail. Though the Company has put hedges in place that will largely protect its revenues in 2020, the duration and full impacts of the COVID-19 pandemic and any further actions by OPEC+ countries are unknown at this time. As further discussed below, the Company has taken steps to preserve liquidity, reduce its operating budget and curtail its near-term operations during the quarter, but we can provide no assurance regarding the long-term impact of these developments on our business.
As a company, we continue to manage the business to preserve the value of our reserves and conserve our assets in light of the demand impacts of the COVID-19 pandemic. Along with others in the energy industry, we are impacted by fundamentals driven by the duration of the pandemic and the impact on the economy. We have managed the business effectively through the market’s downturns over the last several years and believe we are positioned to continue to do so, by leveraging our assets and implementing strategies outlined herein. We have opportunistically added economic hedges in 2021 and 2022 as forward prices increased above $40/bbl.
Like most companies, uncertainty is our greatest obstacle right now. Our executive management team and our Board of Directors are continually monitoring, communicating, collaborating, and carefully considering our course of action. We are evaluating the extent of potential changes, as well as how such changes align with our goals of generating free cash flow and preserving our balance sheet strength and liquidity.
Our planned capital spending estimate for all of 2020 is approximately $1.050 billion to $1.150 billion. This estimate is an approximate $650 million reduction of our originally planned capital spending. We will be reactive to current market conditions and may further reduce our capital spending. We communicated in first-quarter 2020 our plan to exit 2020 with six rigs comprised of five in the Delaware Basin and one in the Williston Basin, however, we may continue to use two additional rigs in the Delaware Basin after contract terms expire in fourth-quarter 2020. Our completions activity will be limited in 2020 which will result in an inventory of drilled uncompleted wells (“DUC”s) although we currently expect to add two to three completion crews that will result in more completions activity towards the latter part of the year. The timing for completion of these wells is subject to multiple variables, including commodity prices which will drive operating results from these wells. We will continue

24










to evaluate supply and demand fundamentals, as well as our ability to generate free cash flow and preserve our balance sheet, in determining when to complete these wells.
We have taken steps to reduce our gathering, processing and transportations expense along with our lease and facility operating costs. We curtailed our production in the second quarter, and further reduced production by delaying well completions. We also reduced contractor services and equipment rentals, and renegotiated rates for ongoing services. We will continue to pursue additional reductions in these areas and are also evaluating other reductions to personnel costs and other administrative expenses; however, no final decisions have been made, as we balance near-term concerns with long-term strategies of the company, including implementing a meaningful dividend, reducing our leverage metrics, and continuing to opportunistically repurchase our shares. Our focus is, in part, on the important metrics that will drive investor interest over the next 5 years and allow us to compete within any sector, not just energy.
As a result of the environment, specifically in first-quarter 2020, the book values of our proved properties were evaluated for impairment. This evaluation excluded the impact of derivatives and is based on management estimates of several inputs including estimated reserves, future commodity prices, development and operating costs and drilling plans. Following this review in the first quarter of 2020, we recorded $1 billion of impairment charges related to our Williston properties (see Note 5 of Notes to Consolidated Financial Statements). We do not believe there are new indicators of impairment in the second quarter of 2020 that would impact our impairment analysis.
In the midst of these challenges, we closed on our acquisition of Felix Energy Holdings II, LLC, or Felix (collectively, the “Felix Acquisition”) on March 6, 2020, which included cash consideration of $939 million and approximately 153 million shares of our common stock. The funding of the cash portion primarily came from proceeds from a very successful January 2020 offering of $900 million of 4.50% Senior Notes due in 2030. See Note 2 of Notes to Consolidated Financial Statements for further discussion of the Felix Acquisition. This is a key acquisition, helping enhance our cash flow, the scale of our holdings and our longer-term upside.
On March 6, 2020, Fitch upgraded us to an investment-grade credit rating, a reflection of the actions we have taken to reduce debt, obtain lower interest rates and maintain positive cash flow. Our liquidity at June 30, 2020 totaled approximately $1.9 billion, reflecting amounts available under the Credit Facility Agreement and cash on hand. A portion of our liquidity relates to proceeds from a senior notes offering in June 2020 which will be used to retire other senior notes as discussed below.
In June 2020, we issued $500 million 5.875% Senior Notes due in 2028 (the “2028 Notes”) and concurrently launched a tender offer for up to $450 million of Senior Notes primarily targeting Senior Notes due in 2022 and 2023. On July 2, 2020, we closed and settled the tender offer retiring approximately $369 million of Senior Notes. We may use the remaining net proceeds from the 2028 Notes offering to opportunistically repurchase long-term debt through open market purchases or privately negotiated transactions or otherwise. Such repurchases, if any, will depend on market conditions, our liquidity requirements, contractual restrictions and other factors.
After consideration of the tender offer discussed above, our next Senior Note maturity of $43 million is not due until 2022. As of this filing, our Credit Facility Agreement is subject to a $2.1 billion borrowing base with aggregate elected commitments of $1.5 billion and a maturity date of April 17, 2023 (see Note 8 of Notes to Consolidated Financial Statements for further discussion). In April, we completed the bank redetermination of borrowing base that was affirmed at $2.1 billion. Several peers had reductions in borrowing base and commitments during spring 2020 redeterminations. Our next redetermination date is October 2020.
Overall, we believe we are well positioned for this near term disruption. However, the challenging and dynamic environment of the oil and gas industry, along with future market conditions, may alter these expectations or plans. If we foresee further changes in market conditions, including prolonged depressed commodity prices, we will evaluate the appropriateness of adjustments to our plans.
As we execute on our long-term strategy, we continue to operate with a focus on increasing shareholder value and investing in our businesses in a way that enhances our competitive position by:
sustainable, value driven and environmentally responsible development of our positions in the Delaware and Williston Basins;
successful integration of Felix;
continuing to pursue cost improvements and efficiency gains;
employing new technology and operating methods;
continuing to invest in projects to assess resources and add new development opportunities or opportunistic acquisitions to our portfolio;
retaining the flexibility to make adjustments to our planned levels and allocation of capital investment expenditures in response to changes in economic conditions or business opportunities; and

25










continuing to maintain an active economic hedging program around our commodity price risks.
Potential risks or obstacles that could impact the execution of our plan include:
lower than anticipated recovery in demand for energy worldwide;
lower than anticipated energy commodity prices, including recovery from current levels;
disruptions to general economic conditions as a consequence of global pandemics, including the COVID-19 pandemic;
inability to successfully integrate Felix’s operations or to realize cost savings, revenues or other anticipated benefits of the Felix Acquisition;
increase in the cost of, or shortages or delays in the availability of, drilling rigs and equipment supplies, skilled labor or transportation;
higher capital costs of developing our properties, including the impact of inflation;
lower than expected levels of cash flow from operations;
counterparty credit and performance risk;
general economic, financial markets or industry downturn including changes attributable to competition for market share among major oil-exporting countries;
unavailability of capital either under our revolver or access to capital markets;
changes in the political and regulatory environments; and
decreased drilling success.
We continue to address certain of these risks through utilization of commodity hedging strategies, disciplined investment strategies and maintaining adequate liquidity. In addition, we use master netting agreements and collateral requirements with our counterparties to reduce credit risk and liquidity requirements. Further, we continue to monitor the long-term market outlooks and forecasts for potential indicators of further needed changes to our forecasted oil and natural gas prices. As noted above, the commodity prices are volatile and prices for a barrel of oil ranged from over $100 per barrel to less than $20 per barrel since 2014. Our forecasted price assumptions reflect a long-term view of pricing and also consider current prices consistent with pricing assumptions generally used in evaluating our drilling decisions and acquisition plans. In the first quarter of 2020, we adjusted our forecasted commodity prices especially those in the next two years and evaluated our producing properties for impairment. This resulted in an impairment of our Williston properties in first quarter 2020. If the forecasted oil and natural gas prices were to further decline, we would need to perform additional reviews of proved properties for possible impairment. Because of the uncertainty inherent in these factors, we cannot predict when or if future impairment charges will be recorded. If further impairments were required, the charges could be significant. The net book value of our proved properties is approximately $6.3 billion and is primarily associated with our Delaware Basin Properties. In addition, the net book value associated with unproved leasehold is approximately $2.1 billion and is also primarily associated with our Delaware Basin properties. See Note 5 of Notes to Consolidated Financial Statements herein and the Critical Accounting Estimates section of Item 7 in our Annual Report on Form 10-K for the year ended December 31, 2019 for further discussion.

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Results of Operations
Three Month-Over-Three Month Results of Operations
Revenue analysis 
 Three months
ended June 30,
Favorable (Unfavorable) $ ChangeFavorable (Unfavorable) % Change
 20202019
 (Millions)  
Revenues:
Oil sales$241  $511  $(270) (53)%
Natural gas sales11  16  (5) (31)%
Natural gas liquid sales22  31  (9) (29)%
Total product revenues274  558  (284) (51)%
Net gain (loss) on derivatives
(275) 78  (353) NM
Commodity management32  58  (26) (45)%
Other   100 %
Total revenues$33  $695  $(662) (95)%
__________
NM: A percentage calculation is not meaningful due to change in signs, a zero-value denominator or a percentage change greater than 200.
Significant variances in the respective line items of revenues are comprised of the following:
$270 million decrease in oil sales reflects $405 million related to lower sales prices partially offset by $135 million related to higher production sales volumes for the three months ended June 30, 2020 compared to 2019. The Delaware Basin volumes increased to 76.6 MBbls per day from 46.5 MBbls per day for the three months ended June 30, 2020 and 2019, respectively.The increase in production sales volumes relates to the Felix properties acquired March 6, 2020 (see Note 2 of Notes to Consolidated Financial Statements). The Williston Basin volumes decreased due in part to production curtailment in 2020 and were 47.1 MBbls per day as compared to 51.4 MBbls per day for the three months ended June 30, 2020 and 2019, respectively. The following table reflects oil production prices, the price impact of our derivative settlements and volumes for the three months ended June 30, 2020 and 2019:
 Three months
ended June 30,
 20202019
 
Oil sales (per barrel)$21.42  $57.42  
Impact of net cash paid related to settlement of derivatives (per barrel)(a)
30.17  (2.98) 
Oil net price including derivative settlements (per barrel)$51.59  $54.44  
Oil production sales volumes (MBbls)11,2598,905
Per day oil production sales volumes (MBbls/d)123.797.9
__________
(a) Included in net gain (loss) on derivatives on the Consolidated Statements of Operations.

27










$5 million decrease in natural gas sales reflects $12 million related to lower sales prices partially offset by $7 million related to higher production sales volumes for the three months ended June 30, 2020 compared to 2019. The Delaware Basin volumes were 239.1 MMcf per day compared to 170.9 MMcf per day for the three months ended June 30, 2020 and 2019, respectively. The increase in production sales volumes relates to the Felix properties acquired March 6, 2020 (see Note 2 of Notes to Consolidated Financial Statements). The following table reflects natural gas production prices, the price impact of our derivative settlements and volumes for the three months ended June 30, 2020 and 2019:
 Three months
ended June 30,
 20202019
 
Natural gas sales (per Mcf)$0.43  $0.88  
Impact of net cash received related to settlement of derivatives (per Mcf)(a)
(0.13) 0.88  
Natural gas net price including derivative settlements (per Mcf)$0.30  $1.76  
Natural gas production sales volumes (MMcf)26,116  18,736  
Per day natural gas production sales volumes (MMcf/d)287.0205.9
__________
(a) Included in net gain (loss) on derivatives on the Consolidated Statements of Operations.
$9 million decrease in natural gas liquids sales reflects $18 million related to lower sales price partially offset by $9 million related to higher production sales volumes for the three months ended June 30, 2020 compared to 2019. The Delaware Basin volumes were 27.2 MBbls per day compared to 21.7 MBbls per day for the three months ended June 30, 2020 and 2019, respectively. The increase in production sales volumes relates to the Felix properties acquired March 6, 2020 (see Note 2 of Notes to Consolidated Financial Statements). The following table reflects NGL production prices and volumes for the three months ended June 30, 2020 and 2019:
 Three months
ended June 30,
 20202019
 
NGL net price (per barrel)$6.74  $12.21  
NGL production sales volumes (MBbls)3,2222,493
Per day NGL production sales volumes (MBbls/d)35.427.4

$353 million unfavorable change in net gain (loss) on derivatives primarily reflects unfavorable change in crude oil derivatives which was a result of losses in 2020 due to increase in 2020 of forward commodity prices relative to our hedge positions as opposed to gains in 2019 due to decreases in 2019 of forward commodity prices relative to our hedge position at that time. Settlements received on derivatives totaled $337 million for the three months ended June 30, 2020 and settlements paid totaled $10 million for three months ended June 30, 2019.
$26 million decrease in commodity management revenues is primarily due to lower prices on crude sales and lower natural gas sales volumes partially offset by higher crude sales volumes. Higher natural gas sales volumes in 2019 were a result of excess pipeline capacity in the Delaware Basin which we utilized to purchase natural gas at depressed Delaware Basin pricing and transport to sales points outside the Basin. Crude sales volumes include purchases to fulfill certain sales commitments. Related commodity management costs and expenses decreased $9 million and are discussed below.

28










Cost and operating expense and operating income analysis
 Three months
ended June 30,
Favorable (Unfavorable) $ ChangeFavorable (Unfavorable) % ChangePer Boe Expense
 2020201920202019
 (Millions)  
Costs and expenses:
Depreciation, depletion and amortization$229  $221  $(8) (4)%$12.15$15.24
Lease and facility operating94  94  —  — %$4.96$6.50
Gathering, processing and transportation67  40  (27) (68)%$3.53$2.78
Taxes other than income25  43  18  42 %$1.33$2.95
Exploration19  24   21 %
General and administrative:
General and administrative expenses
33  40   18 %$1.75$2.73
Equity-based compensation
  (1) (13)%$0.49$0.56
Total general and administrative
42  48   13 %$2.24$3.29
Commodity management
32  41   22 %
Acquisition costs —  (3) NM
Other—net(7)  10  NM
Total costs and expenses$504  $514  $10  %
Operating income (loss)$(471) $181  $(652) NM
__________
NM: A percentage calculation is not meaningful due to change in signs, a zero-value denominator or a percentage change greater than 200.
Significant variances in our costs and expenses are comprised of the following:
$8 million increase in depreciation, depletion and amortization primarily reflects approximately $56 million related to the Felix properties acquired in March 2020 that was substantially offset by a $3.09 per Boe decrease in rate compared to June 30, 2019. The decrease in rate was primarily the result of a decrease to the depletable base following the impairment of proved properties in the Williston Basin in the first quarter of 2020 (see Note 5 of Notes to Consolidated Financial Statements), partially offset by the impact of lower estimated proved reserves as compared to June 30, 2019 primarily due to a lower trailing 12-month average price.
Lease and facility operating expenses remained flat as approximately $27 million related to the acquired Felix properties was offset by a $1.56 per Boe decrease in the overall rate per Boe for the three months ended June 30, 2020 compared to the same time in 2019.
$27 million increase in gathering, processing and transportation primarily due to $18 million related to the acquired Felix properties and a Delaware Basin related contract entered into in late 2019.
$18 million decrease in taxes other than income relate to decreased product revenues as previously discussed.
$6 million decrease in general and administrative expense for the three months ended June 30, 2020 compared to the same period in 2019 due in part to lower estimated employee incentive bonus in 2020. Our general and administrative expenses per Boe decreased to an average $2.24 for the three months ended June 30, 2020 compared to $3.29 for the same period in 2019.
$9 million decrease in commodity management expenses is primarily due to depressed pricing resulting in lower crude oil cost of sales substantially offset by higher crude purchase volumes.
Other expense for 2020 includes a $5 million gain related to an exchange of leasehold (see Note 12 of Notes to Consolidated Financial Statements).

29










Results below operating income
 Three months
ended June 30,
Favorable (Unfavorable) $ ChangeFavorable (Unfavorable) % Change
 20202019
 (Millions)  
Operating income (loss)$(471) $181  $(652) NM
Interest expense(49) (40) (9) (23)%
Gains on equity method investment transactions 247  (245) 99 %
Equity earnings   NM
Investment income (loss) and other(1) —  (1) NM
Income (loss) from continuing operations before income
    taxes
(514) 389  (903) NM
Provision (benefit) for income taxes(101) 84  185  NM
Income (loss) from continuing operations(413) 305  (718) NM
Income from discontinued operations —   NM
Net income (loss)$(408) $305  (713) NM
__________
NM: A percentage calculation is not meaningful due to change in signs, a zero-value denominator or a percentage change greater than 200.
The increase in interest expense primarily relates to higher level of debt outstanding in 2020 compared to 2019 as a result of the debt issued for the Felix Acquisition. See Note 7 of Notes to Consolidated Financial Statements.
During the second quarter of 2019, we recorded a gain related to our equity method investment in the Oryx pipeline. See Note 5 of Notes to Consolidated Financial Statements for detail of this transaction.
For the three months ended June 30, 2020, we had a benefit for income taxes compared to a provision for the same period of 2019 due to a loss from continuing operations for 2020 compared to income from continuing operations for 2019. See Note 8 of Notes to Consolidated Financial Statements for a discussion of the effective tax rates compared to the federal statutory rate for 2020 and 2019.


30










Six Month-Over-Six Month Results of Operations
Revenue analysis 
 Six months
ended June 30,
Favorable (Unfavorable) $ ChangeFavorable (Unfavorable) % Change
 20202019
 (Millions)  
Revenues:
Oil sales$706  $960  $(254) (26)%
Natural gas sales24  41  (17) (41)%
Natural gas liquid sales46  64  (18) (28)%
Total product revenues776  1,065  (289) (27)%
Net gain (loss) on derivatives594  (129) 723  NM
Commodity management56  117  (61) (52)%
Other   NM
Total revenues$1,431  $1,054  $377  36 %
__________
NM: A percentage calculation is not meaningful due to change in signs, a zero-value denominator or a percentage change greater than 200.
Significant variances in the respective line items of revenues are comprised of the following:
$254 million decrease in oil sales reflects $518 million related to lower sales prices partially offset by $264 million related to higher production sales volumes for the six months ended June 30, 2020 compared to 2019. The Delaware Basin production volumes were 68.4 MBbls per day compared to 45.4 MBbls per day for the six months ended June 30, 2020 and 2019, respectively. The increase in production volumes primarily relates to the Felix properties acquired March 6, 2020, see Note 2 of Notes to Consolidated Financial Statements. The Williston Basin production volumes were 54.6 MBbls per day compared to 51.6 MBbls per day for the six months ended June 30, 2020 and 2019, respectively. The following table reflects oil sales prices, the price impact of our derivative settlements and production volumes for the six months ended June 30, 2020 and 2019:
 Six months
ended June 30,
 20202019
 
Oil sales (per barrel)$31.56  $54.71  
Impact of net cash received (paid) related to settlement of derivatives (per barrel)(a)
20.19  (1.50) 
Oil net price including derivative settlements (per barrel)$51.75  $53.21  
Oil production sales volumes (MBbls)22,38117,552
Per day oil production sales volumes (MBbls/d)123.0  97.0  
_________
(a) Included in net gain (loss) on derivatives on the Consolidated Statements of Operations.

31










$17 million decrease in natural gas sales reflects $30 million related to lower sales prices partially offset by $13 million related to higher production sales volumes for the six months ended June 30, 2020 compared to 2019. The increase in our production sales volumes primarily relates to our Delaware Basin which had production volumes of 216.9 MMcf per day compared to 168.7 MMcf per day for the six months ended June 30, 2020 compared to 2019, respectively. This increase in sales primarily relates to the Felix properties acquired March 6, 2020, see Note 2 of Notes to Consolidated Financial Statements. The following table reflects natural gas sales prices, the price impact of our derivative settlements and production volumes for the six months ended June 30, 2020 and 2019:
 Six months
ended June 30,
 20202019
 
Natural gas sales (per Mcf)$0.49  $1.12  
Impact of net cash received related to settlement of derivatives (per Mcf)(a)
0.02  0.65  
Natural gas net price including derivative settlements (per Mcf)$0.51  $1.77  
Natural gas production sales volumes (MMcf)48,32836,947
Per day natural gas production sales volumes (MMcf/d)265.5  204.1  
__________
(a) Included in net gain (loss) on derivatives on the Consolidated Statements of Operations.
$18 million decrease in natural gas liquids sales reflects $38 million related to lower sales prices partially offset by $20 million related to higher production sales volumes for the six months ended June 30, 2020 compared to 2019. Delaware Basin production volumes were 26.0 MBbls per day compared to 20.8 MBbls per day for the six months ended June 30, 2020 and 2019, respectively. The increase in production sales volumes relates to the Felix properties acquired March 6, 2020 (see Note 2 of Notes to Consolidated Financial Statements). Williston Basin production volumes were 8.7 MBbls per day compared to 5.5 MBbls per day for the six months ended June 30, 2020 and 2019, respectively. The following table reflects NGL production prices and volumes for the six months ended June 30, 2020 and 2019:
 Six months
ended June 30,
 20202019
 
NGL net price (per barrel)$7.23  $13.29  
NGL production sales volumes (MBbls)6,3204,781
Per day NGL production sales volumes (MBbls/d)34.726.4

$723 million favorable change in net gain (loss) on derivatives primarily reflects favorable change in crude oil derivatives which was a result of gains in 2020 due to decreases in 2020 of forward commodity prices relative to our hedge positions as opposed to losses in 2019 due to increases in 2019 of forward commodity prices relative to our hedge position at that time. Settlements received on derivatives totaled $454 million for the six month ended June 30, 2020 and settlements paid totaled $1 million for the six months ended June 30, 2019.
$61 million decrease in commodity management revenues primarily due to lower prices on crude sales and lower natural gas volumes, partially offset by higher crude sales volumes. Higher natural gas sales volumes in 2019 were a result of excess pipeline capacity in the Delaware Basin which we utilized to purchase natural gas at depressed Delaware Basin pricing and transport to sales points outside the Basin. Related commodity management costs and expenses decreased $24 million and are discussed below.

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Cost and operating expense and operating income analysis
 Six months
ended June 30,
Favorable (Unfavorable) $ ChangeFavorable (Unfavorable) % ChangePer Boe Expense
 2020201920202019
 (Millions)  
Costs and expenses:
Depreciation, depletion and amortization$488  $440  $(48) (11)%$13.29$15.46
Lease and facility operating195  180  (15) (8)%$5.30$6.32
Gathering, processing and transportation129  82  (47) (57)%$3.50$2.88
Taxes other than income67  82  15  18 %$1.83$2.87
Exploration86  48  (38) (79)%
General and administrative:
General and administrative expenses
75  79   %$2.04$2.77
Equity-based compensation
18  16  (2) (13)%$0.50$0.56
Total general and administrative
93  95   %$2.54$3.33
Commodity management
66  90  24  27 %
Impairment of proved properties
967  —  (967) NM
Acquisition costs30  —  (30) NM
Other—net  (2) (40)%
Total costs and expenses$2,128  $1,022  $(1,106) (108)%
Operating income (loss)$(697) $32  $(729) NM
__________
NM: A percentage calculation is not meaningful due to change in signs, a zero-value denominator or a percentage change greater than 200.
Significant variances in our costs and expenses are comprised of the following:
$48 million increase in depreciation, depletion and amortization, primarily reflects approximately $71 million from the Felix properties acquired in March 2020, as well as higher production volumes. These increases were partially offset by a $2.17 per Boe decrease in rate compared to June 30, 2019. The decrease in rate was primarily the result of a decrease to the depletable base following the impairment of proved properties in the Williston Basin in the first quarter of 2020 (see Note 5 of Notes to Consolidated Financial Statements), partially offset by the impact of lower estimated proved reserves as compared to June 30, 2019 primarily due to a lower trailing 12-month average price.
$15 million increase in lease and facility operating expenses of which approximately $35 million related to the acquired Felix properties. This increase was substantially offset by a $1.02 per Boe decrease in rate for the six months ended June 30, 2020 compared to the same time in 2019.
$47 million increase in gathering, processing and transportation primarily related to approximately $25 million from Felix properties acquired March 6, 2020, growth in production volumes and a Delaware Basin related contract entered into in late 2019.
$15 million decrease in taxes other than income relate to decreased product revenues, as previously discussed.
$38 million increase in exploration expense primarily relates to an impairment of unproved leasehold in the Williston Basin in 2020 (see Note 5 of Notes to Consolidated Financial Statements).
$24 million decrease in commodity management expenses is primarily due to depressed pricing resulting in lower crude cost of sales, lower natural gas purchase volumes and depressed Delaware Basin pricing on physical natural gas cost of sales. These decreases are partially offset by increased crude purchase volumes for 2020 and lower-of-cost or market adjustments on long-term line fill of approximately $8 million, recorded in first-quarter 2020.
$967 million impairment on Williston proved properties recorded in 2020 (see Note 5 of Notes to Consolidated Financial Statements).
$30 million of acquisition costs in 2020 for the Felix Acquisition (see Note 2 of Notes to Consolidated Financial Statements).
Other expense in 2020 includes a $13 million lower-of-cost or market adjustment on materials and supplies inventory made in 2020 which was partially offset by a $5 million gain related to an exchange of leasehold in second-quarter 2020 (see Note 12 of Notes to Consolidated Financial Statements).

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Results below operating income
 Six months
ended June 30,
Favorable (Unfavorable) $ ChangeFavorable (Unfavorable) % Change
 20202019
 (Millions)  
Operating income (loss)$(697) $32  $(729) NM
Interest expense(97) (81) (16) (20)%
Gains on equity method investment transactions 373  (371) (99)%
Equity earnings   167 %
Other income —   NM
Income (loss) from continuing operations before income taxes
(781) 327  (1,108) NM
Provision (benefit) for income taxes(162) 70  (232) NM
Income (loss) from continuing operations(619) 257  (876) NM
Loss from discontinued operations(175) —  (175) NM
Net income (loss)$(794) $257  (1,051) NM
__________
NM: A percentage calculation is not meaningful due to change in signs, a zero-value denominator or a percentage change greater than 200.
The increase in interest expense primarily relates to higher level of debt outstanding in 2020 compared to 2019 as a result of the debt issued for the Felix Acquisition (see Note 7 of Notes to Consolidated Financial Statements).
Gains on equity method investment transactions related to the 2019 sale of our equity interest in the Whitewater natural gas pipeline and a 2019 distribution received related to our 25 percent equity interest in the Oryx pipeline. See Note 5 of Notes to Consolidated Financial Statements for details of this sale.
For the six months ended June 30, 2020, we had a benefit for income taxes compared to a provision for the same period of 2019 due to a loss from continuing operations for 2020 compared to income from continuing operations for 2019. See Note 8 of Notes to Consolidated Financial Statements for a discussion of the effective tax rates compared to the federal statutory rate for 2020 and 2019.
Loss from discontinued operations in 2020 included a $184 million accrual for a performance guarantee related to gathering and processing contracts assumed by the buyer of the properties in the San Juan Gallup. See Note 3 of Notes to Consolidated Financial Statements for additional details.
Management’s Discussion and Analysis of Financial Condition and Liquidity
Overview and Liquidity
We expect our capital structure will provide us financial flexibility to meet our requirements for working capital and capital expenditures while maintaining a sufficient level of liquidity. Our primary sources of liquidity in 2020 are cash on hand, expected cash flows from operations, including derivatives, contributions from noncontrolling interests, and, if necessary, borrowings on our credit facility. We anticipate that the combination of these sources should be sufficient to allow us to continue our operations through at least 2020. We previously communicated our 2020 goals of implementing a meaningful dividend, targeting a 7 percent to 10 percent free cash flow yield, driving down our leverage metrics from current levels and continuing to opportunistically repurchase our shares. These goals remain our focus but are subject to changes as we navigate through the current world economic environment caused by the COVID-19 pandemic and the world oil market disruptions. Additional sources of liquidity, if needed and if available, include proceeds from asset sales, bank financings and proceeds from the issuance of long-term debt and equity securities.
We note the following assumptions for 2020:
our estimated planned capital expenditures for full-year 2020, excluding acquisitions, could range from approximately $1.050 billion to $1.150 billion. However, we will be reactive to current market conditions and may further reduce our capital spending. As of June 30, 2020, we have incurred $467 million of drilling and completion capital expenditures including facilities; and
we have hedged a significant portion of our anticipated 2020 oil and gas production as disclosed in Commodity Price Risk Management following this section.

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Potential risks associated with our planned levels of liquidity and the planned capital expenditures discussed above include:
lower than expected levels of cash flow from operations, primarily resulting from lower energy commodity prices or inflation of operating costs;
our ability to successfully integrate Felix's operation or to realize costs savings, revenues or other anticipated benefits of the Felix Acquisition;
long-term disruptions to general economic conditions as a consequence of global pandemics, including the COVID-19 pandemic;
significantly lower than expected capital expenditures could result in the loss of undeveloped leasehold;
reduced access to our credit facility pursuant to our financial covenants or banking environment including the April and October borrowing base redeterminations; and
higher than expected development costs, including the impact of inflation.
Credit Facility
Our Credit Facility, as amended, includes total commitments of $1.5 billion on a $2.1 billion Borrowing Base with a maturity date of April 17, 2023, subject to a springing maturity on October 15, 2021 if available liquidity minus outstanding 2022 notes is less than $500 million (see Note 7 of Notes to Consolidated Financial Statements). Based on our current credit ratings, a Collateral Trigger Period applies which makes the Credit Facility subject to certain financial covenants and a Borrowing Base. The Credit Facility may be used for working capital, acquisitions, capital expenditures and other general corporate purposes. The financial covenants in the Credit Facility may limit our ability to borrow money, depending on the applicable financial metrics at any given time. For additional information regarding the terms of our Credit Facility, see Note 8 of Notes to Consolidated Financial Statements on our Annual Report on Form 10-K for the year ended December 31, 2019. As of June 30, 2020, WPX had no borrowings outstanding and $18 million of letters of credit issued under the Credit Facility and we were in compliance with our covenants under the credit agreement. Our unused borrowing availability was $1,482 million as of June 30, 2020. In April 2020, our annual redetermination confirmed our Borrowing Base of $2.1 billion and total commitments of $1.5 billion that will remain in effect until the next Redetermination Date, which is expected to be in October 2020. Several peers have had reductions in borrowing base and commitments during spring 2020 redeterminations. As of the date of this filing, we are in compliance with all terms, conditions and financial covenants of the Credit Facility, as amended.
Senior Notes
During second-quarter 2020, we completed a debt offering of $500 million of 5.875% Senior Notes due 2028 (“2028 Notes”). Subsequent to June 30, 2020, we closed on the purchase of approximately $369 million of a portion of our 2022 Notes, 2023 Notes and 2024 Notes with an estimated loss on extinguishment of debt of $24 million to be recorded in third-quarter 2020. We may use the remaining net proceeds from the 2028 Notes offering to opportunistically repurchase long-term debt through open-market purchases or privately negotiated transactions or otherwise. Such repurchases, if any, will depend on market conditions, our liquidity requirements, contractual restrictions and other factors. See Note 7 of Notes to Consolidated Financial Statements for further discussion of our senior notes.

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Commodity Price Risk Management
To manage the commodity price risk and volatility of owning producing oil and gas properties, we enter into derivative contracts for a portion of our future production (see Note 13 of Notes to Consolidated Financial Statements). We chose not to designate our derivative contracts associated with our future production as cash flow hedges for accounting purposes. The following table sets forth, as of the date of this filing, the derivative notional volumes of the net (long) short positions for the remainder of 2020 and 2021 that are economic hedges of our production volumes:
Crude OilJul - Dec 20202021
 Volume
(Bbls/d)
Weighted Average
Price ($/Bbl)
Volume
(Bbls/d)
Weighted Average
Price ($/Bbl)
Fixed Price Swaps—WTI91,800  $53.06  59,878  $40.78  
Fixed Price Swaptions—WTI—  $—  20,000  $57.02  
Fixed Price Swaptions—WTI—  $—  5,041  $40.12  
Fixed Price Calls—WTI—  $—  5,000  $39.50  
Fixed Price Costless Collars—WTI20,000  $53.33 - $63.48—  $—  
Basis Swaps—Midland/Cushing35,000  $0.63  15,000  $0.64  
Basis Swaps—Nymex Calendar Monthly Avg Roll51,685  $(0.50) —  $—  
Basis Swaps—Brent/WTI Spread5,000  $8.36  1,000  $8.00  
Basis Swaps—MEH/Midland842  $(0.85) —  $—  

Natural GasJul - Dec 20202021
 Volume
(BBtu/d)
Weighted Average
Price ($/MMBtu)
Volume
(BBtu/d)
Weighted Average
Price ($/MMBtu)
Fixed Price Swaps—Henry Hub—  $—  240  $2.62  
Fixed Price Swaptions—Henry Hub—  $—  50  $2.68  
Basis Swaps—Waha100  $(1.14) 80  $(0.65) 

Sources (Uses) of Cash
 Six months
ended June 30,
 20202019
 (Millions)
Net cash provided by (used in):
Operating activities$532  $634  
Investing activities(1,523) (195) 
Financing activities1,340  (330) 
Net increase in cash and cash equivalents and restricted cash$349  $109  
Operating activities
Net cash provided by operating activities decreased for the six months ended June 30, 2020 compared to the same period in 2019 primarily due to lower commodity prices, higher operating costs, and acquisition costs in 2020, partially offset by higher realizations on our derivatives and higher production volumes. Net cash provided by operating activities for the six months ended June 30, 2019 includes the receipt of approximately $38 million related to an alternative minimum tax credit refund.

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Investing activities
The table below reflects capital expenditures, exclusive of partnerships, for the periods presented.
Six months
ended June 30,
20202019
(Millions)
Incurred capital expenditures:
Drilling, completions and facilities
$467  $587  
Land acquisitions
 103  
Infrastructure15  65  
Other
17  11  
Total incurred capital expenditures
501  766  
Changes in related accounts payable and accounts receivable97   
Cash capital expenditures reported on the Consolidated Statements of
Cash Flows
$598  $774  
Net cash used in investing activities for the six months ended June 30, 2020 includes $915 million, net of cash acquired, paid for the successful completion of the Felix Acquisition. Net cash used in investing activities for the six months ended June 30, 2019 includes the proceeds from the sale of certain non-core properties and proceeds related to transactions involving our equity method investments including our 20 percent equity interest in Whitewater natural gas pipeline and our 25 percent equity interest in the Oryx pipeline (see Note 5 of Notes to Consolidated Financial Statements).
Financing activities
Net cash provided by financing activities for the six months ended June 30, 2020 includes approximately $1,377 million of net proceeds from the debt issuances in the first and second quarters of 2020 (see Note 7 of Notes to Consolidated Financial Statements), $44 million of payments for repurchases of common stock under our share repurchase program (see Note 11 of Notes to Consolidated Financial Statements) and $24 million of contributions from noncontrolling interests in consolidated partnerships.
Net cash used in financing activities for the six months ended June 30, 2020 and 2019 also includes payment for shares withheld for taxes of $8 million and $15 million, respectively.
Contractual Obligations
As disclosed in our 2019 Annual Report on Form 10-K, our contractual obligations table excluded $875 million of additional commitments associated with projects for which the counterparty had not completed construction. Significant changes in this $875 million include the following:
$200 million reduction related to natural gas transportation capacity associated with a project still under construction in the Delaware Basin.
$287 million reduction after a counterparty cancelled plans to construct certain crude transportation assets.
$102 million that is now a commitment as the counterparty completed construction on a project in the Delaware Basin with a total commitment of approximately $102 million over a 7-year term (see Note 9 of Notes to Consolidated Financial Statements).
Critical Accounting Policies and Estimates
Our accounting policies and estimates that are critical or the most important to understand our financial condition and results of operations, and that require management to make the most difficult judgments, are described in our 2019 Annual Report on Form 10-K. There have been no material changes in these critical accounting policies and estimates, with the exception of Purchase Accounting as described below and as applied to the Felix Acquisition. See Note 2 of Notes to Consolidated Financial Statements for further discussion of the Felix Acquisition.
Purchase Accounting
We periodically acquire assets and assume liabilities in transactions accounted for as business combinations, such as the Felix Acquisition. In connection with a business combination, we must allocate the fair value of consideration given to the

37










assets acquired and liabilities assumed based on estimated fair values as of the acquisition date. Deferred taxes must be recorded for any differences between the assigned values and tax bases of the acquired assets and assumed liabilities. Any excess or shortage of amounts assigned to assets and liabilities over or under the purchase price is recorded as a gain on bargain purchase or goodwill. The amount of goodwill or gain on bargain purchase recorded in any particular business combination can vary significantly depending upon the values attributed to assets acquired and liabilities assumed. In addition, estimates of fair value may not be completed as of the filing date and therefore, adjustments to the purchase price allocation would be finalized in future periods, not to exceed one year from the acquisition date.
In estimating the fair values of assets acquired and liabilities assumed in a business combination, we must make various assumptions. The most significant assumptions relate to the estimated fair values assigned to proved and unproved oil and gas properties. If sufficient market data is not available regarding the fair values of proved and unproved properties, we must prepare estimates and/or engage the assistance of valuation experts. Significant judgments and assumptions are inherent in these estimates and include estimates of reserves quantities, estimates of future commodity prices (developed in consideration of market information, internal forecasts and published forward prices adjusted for locational basis differentials), drilling plans, expected capital and lease operating costs and our estimate of an applicable discount rate commensurate with the risk of the underlying cash flow estimates.
Estimated fair values assigned to assets acquired can have a significant effect on results of operations in the future. A higher fair value assigned to a property results in higher depreciation, depletion and amortization expense, which results in lower net earnings or a higher net loss. A lower fair value assigned to property and related deferred taxes may result in the recording of goodwill. Fair values are based on estimates of future commodity prices, reserves quantities, operating expenses and development costs. This increases the likelihood of impairment if future commodity prices or reserves quantities are lower than those originally used to determine fair value, or if future operating expenses or development costs are higher than those originally used to determine fair value. Impairment would have no effect on cash flows but would result in a decrease in net income or increase in net loss for the period in which the impairment is recorded. See Note 2 of Notes to Consolidated Financial Statements for additional information regarding our purchase price allocations.
Off-Balance Sheet Financing Arrangements
We had no guarantees of off-balance sheet debt to third parties or any other off-balance sheet arrangements at June 30, 2020 or at December 31, 2019. Although not a financing arrangement, we have provided a guarantee for certain obligations transferred as part of a divestment (see Note 3 of Notes to Consolidated Financial Statements).
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
Our current interest rate risk exposure is primarily related to our debt portfolio and has not materially changed during the first six months of 2020.
Commodity Price Risk
We are exposed to the impact of fluctuations in the market price of oil, natural gas and natural gas liquids as well as other market factors, such as market volatility and energy commodity price correlations. We are exposed to these risks in connection with our owned energy-related assets, our long-term energy-related contracts and our marketing trading activities. We manage the risks associated with these market fluctuations using various derivatives and nonderivative energy-related contracts. The fair value of derivative contracts is subject to many factors, including changes in energy commodity market prices, the liquidity and volatility of the markets in which the contracts are transacted and changes in interest rates. See Notes 12 and 13 of Notes to Consolidated Financial Statements.
An assumed increase in the forward prices used in the valuation of our crude oil and natural gas fixed price swap and option derivatives of $5.00 per Bbl and $0.25 per MMBtu would decrease our derivative valuation by approximately $255 million and $165 million at June 30, 2020 and December 31, 2019, respectively. Conversely, an assumed decrease in forward prices of $5.00 per Bbl and $0.25 per MMBtu would increase our derivative valuation by $246 million and $151 million at June 30, 2020 and December 31, 2019, respectively. However, any cash derivative gain or loss would be substantially offset by a decrease or increase, respectively, in the actual sales value of production economically hedged by the derivative instruments. Contracts designated as normal purchases or sales and nonderivative energy contracts have been excluded from this sensitivity analysis.
Our portfolio consists of derivative contracts that hedge or could potentially hedge the price risk exposure from our energy commodity purchases and sales. The fair value of our derivatives not designated as hedging instruments was a net asset of $238 million and net liability $24 million at June 30, 2020 and December 31, 2019, respectively.

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Item 4. Controls and Procedures
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act) (“Disclosure Controls”) or our internal control over financial reporting (“Internal Controls”) will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. We monitor our Disclosure Controls and Internal Controls and make modifications as necessary; our intent in this regard is that the Disclosure Controls and Internal Controls will be modified as systems change and conditions warrant.
Evaluation of Disclosure Controls and Procedures
An evaluation of the effectiveness of the design and operation of our Disclosure Controls was performed as of the end of the period covered by this report. This evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that these Disclosure Controls are effective at a reasonable assurance level.
Changes in Internal Control over Financial Reporting
Our assessment of our system of internal controls included the consideration that, for a portion of the period covered in this report, many of our control owners and control performers have been working remotely due to Federal and State social distancing guidelines. We concluded that, as of the end of the period covered in this report, there have been no changes that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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Part II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note 9 of Notes to Consolidated Financial Statements included under Part I, Item 1. Financial Statements of this report, which information is incorporated by reference into this item.
Item 1A. Risk Factors
Public health events that are outside of our control, including pandemics, epidemics and infectious disease outbreaks, such as the recent global outbreak of COVID-19, have materially and adversely affected, and may further materially and adversely affect, our business.
We face risks related to public health events that are outside our control, including pandemics, epidemics, and infectious disease outbreaks. These events could significantly disrupt our operations and adversely affect our financial condition. For example, the recent global outbreak of COVID-19 has significantly reduced global and national economic activity and, as a result, demand for oil and natural gas. In addition, the impact of COVID-19 or other public health events may adversely affect our operations, the health of our workforce and the health of workforces of our customers and service providers by rendering employees or contractors unable to work or unable to access our and their facilities for an indefinite period of time. International, federal, state and local public health and governmental authorities have taken extraordinary and wide-ranging actions to contain and combat the outbreak and spread of COVID-19 in regions across the United States and the world, including mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations. To the extent COVID-19 continues or worsens, governments may impose or re-impose additional similar restrictions. In addition, the technology required for the corresponding transition to remote work increases our vulnerability to cybersecurity threats, including the potential for unauthorized persons to access sensitive information, render data or systems unusable or steal confidential or proprietary data, the impact of which may have material adverse effects on our business and operations. As the potential impact from COVID-19 is difficult to predict, the extent to which it may negatively affect our operating results or the duration of any potential business disruption is uncertain. Any potential impact will depend on future developments and new information that may emerge regarding the severity and duration of COVID-19 and the actions taken by authorities to contain it or treat its impact, all of which are beyond our control. These potential impacts, while uncertain, could materially and adversely affect our operating results.
Market disruptions attributable to the global COVID-19 pandemic and competition among oil-exporting countries for market share have adversely affected our industry and may continue to do so.
Oil prices have deteriorated due to a softening of global demand caused by the COVID-19 (Coronavirus) pandemic and an increase in global supply caused by a decision of OPEC+ countries to relax or eliminate their production quotas. Though the Company has put hedges in place that will to some degree protect its revenues in 2020, the duration and full impacts of the COVID-19 pandemic and competition for market share among OPEC+ countries are unknown at this time. The Company has taken steps to preserve liquidity, reduce its operating budget and curtail its near-term operations, but we can provide no assurance regarding the long-term impact of these developments on our business. These developments may also have an adverse impact on our suppliers, contractors and service providers. An extended period of supply/demand imbalance as a result of these developments would adversely affect the Company’s financial condition and results of operations.
In addition, Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019, includes certain risk factors that could materially affect our business, financial condition or future results. Those risk factors have not materially changed as of June 30, 2020.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
a.Recent Sales of Unregistered Securities - Not applicable
b.Use of Proceeds - Not applicable.
c.Purchases of Equity Securities by the user and Affiliated Purchasers. The table below provides information about purchases of shares of our common stock during the three months ended June 30, 2020.
PeriodTotal number of shares purchased as part of publicly announced plans or programs(a)Average price paid per shareMaximum dollar value of shares that may yet be purchased under the plans or programs (in millions)(a)
April 1, 2020 to April 30, 2020:
May 1, 2020 to May 31, 2020:
June 1, 2020 to June 30, 2020:
Share repurchase program(a)—  $—  $298,435,060  
Total for the quarter—  $—  $298,435,060  

__________
(a) On August 5, 2019, we announced that our Board of Directors authorized a plan to repurchase up to $400 million of our outstanding shares over a 24 month period. As of June 30, 2020 we have repurchased a total of 16.1 million shares at a cost of $102 million. This stock repurchase program may be modified, suspended or terminated at any time by our Board of Directors.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not applicable.

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EXHIBITS
Exhibit No.  Description
Agreement and Plan of Merger, dated as of July 13, 2015, by and among RKI Exploration & Production, LLC, WPX Energy, Inc. and Thunder Merger Sub LLC (incorporated herein by reference to Exhibit 2.1 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on July 14, 2015)
2.2**
Membership Interest Purchase Agreement by and Among WPX Energy Holdings, LLC, as Seller, WPX Energy, Inc., solely for purposes of Section 14.15, and Terra Energy Partners LLC, as Purchaser, dated February 8, 2016 (incorporated herein by reference to Exhibit 2.1 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on February 9, 2016)
2.3**
Purchase and Sale Agreement, dated as of January 12, 2017, by and among RKI Exploration & Production, LLC, Panther Energy Company II, LLC and CP2 Operating, LLC (incorporated herein by reference to Exhibit 2.1 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on March 13, 2017)
Purchase and Sale Agreement, dated as of December 15, 2019, by and among Felix Investment Holdings II, LLC (incorporated herein by reference to Exhibit 2.1 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on December 16, 2019)
  Restated Certificate of Incorporation of WPX Energy, Inc. (incorporated herein by reference to Exhibit 3.1 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on January 6, 2012)
Certificate of Amendment of Amended and Restated Certificate of Incorporation of WPX Energy, Inc. (incorporated herein by reference to Exhibit 3.1 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on July 14, 2015)
  Amended and Restated Bylaws of WPX Energy, Inc. (incorporated herein by reference to Exhibit 3.1 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on March 21, 2014)
  Indenture, dated as of November 14, 2011, between WPX Energy, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated herein by reference to Exhibit 4.1 to The Williams Companies, Inc.’s Current Report on Form 8-K (File No. 001-04174) filed with the SEC on November 15, 2011)
Indenture, dated as of September 8, 2014, between WPX Energy, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated herein by reference to Exhibit 4.1 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on September 8, 2014)
First Supplemental Indenture, dated as of September 8, 2014, between WPX Energy, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated herein by reference to Exhibit 4.2 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on September 8, 2014)
Second Supplemental Indenture, dated as of July 22, 2015, between WPX Energy, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated herein by reference to Exhibit 4.1 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on July 22, 2015)
Third Supplemental Indenture, dated as of May 23, 2018, between WPX Energy, Inc. and the Bank of New York Mellon Trust Company, N.A. as trustee (incorporated herein by reference to Exhibit 4.1 to WPX Energy, Inc.'s Current Report on Form 8-K filed with the SEC on May 23, 2018)
Fourth Supplemental Indenture, dated as of September 24, 2019, between WPX Energy, Inc. and the Bank of New York Mellon Trust Company, N.A. as trustee (incorporated herein by reference to Exhibit 4.1 to WPX Energy, Inc.'s Current Report on Form 8-K filed with the SEC on September 24, 2019)
Fifth Supplemental Indenture, dated as of January 7, 2020, between WPX Energy, Inc. and the Bank of New York Mellon Trust Company, N.A. as trustee (incorporated herein by reference to Exhibit 4.1 to WPX Energy, Inc.'s Current Report on Form 8-K filed with the SEC on June 17, 2020)
Sixth Supplemental Indenture, dated as of June 17, 2020, between WPX Energy, Inc. and the Bank of New York Mellon Trust Company, N.A. as trustee (incorporated herein by reference to Exhibit 4.1 to WPX Energy, Inc.'s Current Report on Form 8-K filed with the SEC on January 10, 2020)
  Separation and Distribution Agreement, dated as of December 30, 2011, between The Williams Companies, Inc. and WPX Energy, Inc. (incorporated herein by reference to Exhibit 10.1 to WPX Energy, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2011)
  Employee Matters Agreement, dated as of December 30, 2011, between The Williams Companies, Inc. and WPX Energy, Inc. (incorporated herein by reference to Exhibit 10.2 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on January 6, 2012)
  
42


Exhibit No. Description
Tax Sharing Agreement, dated as of December 30, 2011, between The Williams Companies, Inc. and WPX Energy, Inc. (incorporated herein by reference to Exhibit 10.3 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on January 6, 2012)
WPX Energy, Inc. 2013 Incentive Plan (incorporated herein by reference to Exhibit 4.1 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on May 29, 2013) (1)
WPX Energy, Inc. Amended 2011 Employee Stock Purchase Plan (incorporated herein by reference to Appendix B to WPX Energy, Inc.’s definitive proxy statement on Schedule 14A (File No. 001-35322) filed with the SEC on March 29, 2018) (1)
Form of Restricted Stock Agreement between WPX Energy, Inc. and Non-Employee Directors (incorporated herein by reference to Exhibit 10.13 to WPX Energy, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2011) (1)
Form of Restricted Stock Agreement between WPX Energy, Inc. and Executive Officers (incorporated herein by reference to Exhibit 10.13 to WPX Energy, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2014) (1)
 Form of Restricted Stock Unit Agreement between WPX Energy, Inc. and Executive Officers (incorporated herein by reference to Exhibit 10.14 to WPX Energy, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2014) (1)
 Form of Performance-Based Restricted Stock Unit Agreement between WPX Energy, Inc. and Executive Officers (incorporated herein by reference to Exhibit 10.15 to WPX Energy, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015) (1)
 Form of Stock Option Agreement between WPX Energy, Inc. and Executive Officers (incorporated herein by reference to Exhibit 10.15 to WPX Energy, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014) (1)
 WPX Energy Nonqualified Deferred Compensation Plan, effective January 1, 2013 (incorporated herein by reference to Exhibit 10.16 to WPX Energy, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012) (1)
WPX Energy Board of Directors Nonqualified Deferred Compensation Plan, effective January 1, 2013 (incorporated herein by reference to Exhibit 10.17 to WPX Energy, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012) (1)
Employment Agreement, dated April 29, 2014, between WPX Energy, Inc. and Richard E. Muncrief (incorporated herein by reference to Exhibit 10.1 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on May 2, 2014) (1)
Form of Nonqualified Stock Option Agreement between WPX Energy, Inc. and Richard E. Muncrief (incorporated herein by reference to Exhibit 10.2 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on May 2, 2014) (1)
Form of 2014 Time-Based Restricted Stock Unit Agreement between WPX Energy, Inc. and Richard E. Muncrief (incorporated herein by reference to Exhibit 10.3 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on May 2, 2014) (1)
Form of 2014 Performance-Based Restricted Stock Unit Agreement between WPX Energy, Inc. and Richard E. Muncrief (incorporated herein by reference to Exhibit 10.4 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on May 2, 2014) (1)
Form of Time-Based Restricted Stock Unit Inducement Award Agreement between WPX Energy, Inc. and Richard E. Muncrief (incorporated herein by reference to Exhibit 10.5 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on May 2, 2014) (1)
Form of Performance-Based Restricted Stock Unit Inducement Award Agreement between WPX Energy, Inc. and Richard E. Muncrief (incorporated herein by reference to Exhibit 10.6 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on May 2, 2014) (1)
10.19
Form of Restricted Stock Unit Award between WPX Energy, Inc. and Non-Employee Directors (incorporated herein by reference to Exhibit 10.1 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on September 3, 2014) (1)
43


Exhibit No.Description
Amended and Restated Credit Agreement, dated as of October 28, 2014, by and among WPX Energy, Inc., the lenders party thereto, and Citibank, N.A., as Administrative Agent and Swingline Lender (incorporated herein by reference to Exhibit 10.1 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on November 3, 2014)
First Amendment to the Amended and Restated Credit Agreement, dated as of July 16, 2015, by and among WPX Energy, Inc., the lenders party thereto, and Citibank, N.A., as existing Administrative Agent and existing Swingline Lender, and Wells Fargo Bank, National Association, as successor Administrative Agent and successor Swingline Lender (incorporated herein by reference to Exhibit 10.1 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on July 22, 2015)
Commitment Increase Agreement for Amended and Restated Credit Agreement, dated as of July 31, 2015, among WPX Energy, Inc., the Lenders party thereto, Wells Fargo Bank, National Association, as Administrative Agent, and the Issuing Banks thereto (incorporated by reference to Exhibit 10.1 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on August 6, 2015)
Second Amendment to the Amended and Restated Credit Agreement, dated as of March 18, 2016, by and among WPX Energy, Inc., as the borrower thereunder, the financial institutions party thereto from time to time, as lenders, and Wells Fargo Bank, National Association, as Administrative Agent and Swingline Lender (incorporated herein by reference to Exhibit 10.1 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on March 22, 2016)

Form of Performance-Based Restricted Stock Unit Agreement between WPX Energy, Inc. and Executive Officers (incorporated herein by reference to Exhibit 10.32 to WPX Energy, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016) (1)
10.25
Form of Amended and Restated Change in Control Agreement between WPX Energy, Inc. and CEO (incorporated herein by reference to Exhibit 10.1 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on November 16, 2016) (1)
10.26
Form of Amended and Restated Change in Control Agreement between WPX Energy, Inc. and Tier One Executives (incorporated herein by reference to Exhibit 10.32 to WPX Energy, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018) (1)
10.27
Amended and Restated WPX Energy Executive Severance Pay Plan (incorporated herein by reference to Exhibit 10.33 to WPX Energy, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018) (1)
10.28
Purchase and Sale Agreement by and Among WPX Energy Production, LLC and Enduring Resources IV, LLC dated January 30, 2018 (incorporated by reference to Exhibit 2.1 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on February 5, 2018)
10.29
WPX Energy, Inc. 2013 Incentive Plan, as amended (incorporated by reference to Exhibit 10.1 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on February 19, 2018)
Form of Amended and Restated Restricted Stock Agreement between WPX Energy, Inc. and Executive Officers (incorporated by reference to Exhibit 10.2 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on February 19, 2018)
Form of Amended and Restated Performance-Based Restricted Stock Unit Agreement between WPX Energy, Inc. and Executive Officers (incorporated by reference to Exhibit 10.3 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on February 19, 2018)
Amendment No. 3 to the WPX Energy, Inc. 2013 Incentive Plan (incorporated by reference to Appendix A to WPX Energy, Inc.’s definitive proxy statement on Schedule 14A (File No. 001-35322) filed with the SEC on March 29, 2018)
Second Amendment to the Second Amended and Restated Credit Agreement and First Amendment to Guaranty and Collateral Agreement dated April 17, 2018, by and among the Company and certain of its wholly-owned subsidiaries signatory thereto, Wells Fargo Bank, National Association, as lender, Swingline Lender and Administrative Agent and the lenders party thereto (incorporated by reference to Exhibit 10.1 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on April 20, 2018)
10.34
Form of Amendment to Performance-Based Restricted Stock Unit Agreement between WPX Energy, Inc. and Executive Officers (incorporated herein by reference to Exhibit 10.40 to WPX Energy, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018)(1)
Form of Amended and Restated Performance-Based Restricted Stock Unit Agreement between WPX Energy, Inc. and Executive Officers (Incorporated by reference to Exhibit 10.35 to WPX Energy, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2018)
44


Exhibit No.Description
Third Amendment to the Second Amended and Restated Credit Agreement dated April 22, 2019, by and among the Company and certain of its wholly-owned subsidiaries signatory thereto, Wells Fargo Bank, National Association, as lender, Swingline Lender and Administrative Agent and the lenders party thereto (incorporated by reference to Exhibit 10.1 to WPX Energy, Inc.’s Current Report on Form 8-K filed with the SEC on April 23, 2019)
Form of Restricted Stock Agreement between WPX Energy, Inc. and Non-Employee Directors (incorporated herein by reference to Exhibit 10.37 to WPX Energy, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019)(1)
Form of Restricted Stock Unit Award Agreement between WPX Energy, Inc. and Non-Employee Directors(incorporated herein by reference to Exhibit 10.38 to WPX Energy, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019)(1)
Form of amended Exhibit B to Amended and Restated Performance-Based Restricted Stock Unit Agreement between WPX Energy, Inc. and Executive Officers (incorporated herein by reference to Exhibit 10.39 to WPX Energy, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 201)(1)
Stockholders Agreement, by and among WPX Energy, Inc., Felix Investment Holdings II, LLC, EnCap Energy Capital Fund X, L.P. and certain members of Felix Energy Holdings II, LLC’s management team, dated as of March 6, 2020 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on March 6, 2020).
Registration Rights Agreement, by and between WPX Energy, Inc. and Felix Investment Holdings II, LLC, dated as of March 6, 2020 (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on March 6, 2020).
 Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 Certification by the Chief Executive Officer and the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS* XBRL Instance Document - the XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document
101.SCH* XBRL Taxonomy Extension Schema
101.CAL* XBRL Taxonomy Extension Calculation Linkbase
101.DEF* XBRL Taxonomy Extension Definition Linkbase
101.LAB* XBRL Taxonomy Extension Label Linkbase
101.PRE* XBRL Taxonomy Extension Presentation Linkbase


*Filed herewith
**All schedules to the Agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the SEC upon request
(1)Management contract or compensatory plan or arrangement

45




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, thereunto duly authorized.
 
WPX Energy, Inc.
(Registrant)
By: /s/ Stephen L. Faulkner
 Stephen L. Faulkner
Controller
(Principal Accounting Officer)
Date: July 30, 2020
46
Document

Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Richard E. Muncrief, certify that:
1.I have reviewed this quarterly report on Form 10-Q of WPX Energy, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 30, 2020
 
/s/ Richard E. Muncrief
Richard E. Muncrief
Chief Executive Officer


Document

Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, J. Kevin Vann, certify that:
1.I have reviewed this quarterly report on Form 10-Q of WPX Energy, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: July 30, 2020
/s/ J. Kevin Vann
J. Kevin Vann
Chief Financial Officer


Document

Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of WPX Energy, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned hereby certifies, in his capacity as an officer of the Company, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
/s/ Richard E. Muncrief
Richard E. Muncrief
Chief Executive Officer
July 30, 2020
 
/s/ J. Kevin Vann
J. Kevin Vann
Executive Vice President and Chief Financial Officer
July 30, 2020
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
The foregoing certification is being furnished to the Securities and Exchange Commission as an exhibit to the Report and shall not be considered filed as part of the Report.

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