WPX - WPX Energy Reports 1Q 2019 Results

WPX Energy (NYSE:WPX) reported an unaudited first-quarter loss from continuing operations attributable to common shareholders of $48 million, or a loss of $0.11 per share on a diluted basis. This includes $207 million in derivative losses due to an increase in forward oil prices.

Excluding the derivative losses and other items, WPX posted adjusted net income from continuing operations in first-quarter 2019 of $22 million, or income of $0.05 per share. A reconciliation accompanies this press release.

First-quarter oil volumes were 96,100 barrels per day, up nominally from the most recent quarter. Multiple storm-related power outages in the Delaware Basin reduced first-quarter oil volumes by approximately 1,400 bbl/d.

Planned increases in 2019 production are expected to materialize more significantly in the latter half of the year. WPX continues to expect 5-10 percent oil growth from fourth-quarter 2018 to fourth-quarter 2019.

“Our first-quarter results are straight down the fairway. I’m very pleased with our strong, consistent performance and our continued success on the transaction front where we’ve generated substantial returns,” says Rick Muncrief, WPX chairman and chief executive officer.

“WPX’s 2019 plan is right on track for delivering capital discipline, production increases and more than $100 million of free cash flow,” Muncrief added.

RECENT TRANSACTIONS

As previously announced, WPX signed transactions for three divestitures in early 2019 totaling more than $550 million in net proceeds.

WPX already closed the sale of its 20 percent equity interest in WhiteWater Midstream’s Agua Blanca natural gas pipeline system and the sale of a peripheral non-core position (Nine Mile Draw) in the Delaware Basin. The absence of Nine Mile Draw reduced first-quarter oil volumes by approximately 500 bbl/d.

The third transaction – the sale of WPX’s equity interest in the Oryx II pipeline project – is on track to close this quarter. Proceeds will be used to pay off WPX’s revolver balance.

CAPITAL DISCIPLINE

Capital spending for drilling and completions activity on operated wells in first-quarter 2019 was $279.7 million, including the utilization of two rigs in the Delaware which were released in mid-January and late March. WPX’s Delaware rig count is now at five, which will drive a lower run rate for the remainder of the year. WPX’s 2019 D&C budget for operated wells remains at $1.0-$1.1 billion.

Capital spending for non-op D&C activity in first-quarter 2019 was $12.9 million. WPX’s non-op D&C budget for 2019 remains at $50-$75 million.

Capital spending for midstream infrastructure in first-quarter 2019 was $24.6 million. WPX’s 2019 midstream budget remains at $50-$100 million.

During the first quarter, WPX also invested $101.9 million in land acquisitions, predominantly from the $100 million purchase of approximately 14,000 surface acres within its Stateline operations area. This was funded through proceeds from recent divestitures.

Clay Gaspar, WPX president and chief operating officer, said, “Our capital plan for 2019 is unchanged, as is our confidence in our execution. We’re seeing significant cost savings in the Delaware Basin, including a 17 percent decrease in our average two-mile well cost.”

DELAWARE BASIN HIGHLIGHTS

WPX’s Delaware production averaged 92.1 Mboe/d in first-quarter 2019, up 46 percent vs. 63.2 Mboe/d in the same period a year ago.

WPX’s average realized oil price in the Delaware was WTI less $0.09 for the quarter, including Midland basis swaps. The basis swaps increased the average realized price by $1.57 per barrel.

WPX’s average realized natural gas price in the Delaware was NYMEX less $0.76 for the quarter, including basis swaps which increased the average realized price by $0.55 per Mcf.

WPX completed 31 Delaware wells during the first quarter, predominantly in upper Wolfcamp intervals. Almost half of the completions featured lateral lengths of approximately 10,000 feet.

The highest 24-hour rate for the first-quarter Delaware completions was 4,943 Boe/d (53% oil) on the CBR 41-44E-5H well. Eight laterals on the CBR 41 pad have 60-day cumulative production in excess of 660,000 barrels of oil. Five laterals are in the Wolfcamp A interval. The other three are Wolfcamp XY wells.

Four more of the Delaware long laterals were part of the Hattie 3H pad in the River Tracts area in Reeves County, which featured wells in four different intervals (Wolfcamp A, B, D and XY) as WPX delineates acreage outside its core Stateline position.

The highest initial peak rate on the Hattie pad occurred on the Hattie 3-3H well in the Wolfcamp A interval which hit 4,440 Boe/d (44% oil). It has 60-day cumulative production in excess of 89,000 barrels of oil. The 30-day rates from the wells in the other intervals averaged over 2,000 Boe/d, with oil ranging from 47% in the XY to 26% in the D.

The second 200 MMcf/d cryogenic processing train at WPX’s 50/50 joint venture gas plant in Reeves County is now being commissioned. First volumes of wet gas are expected to be introduced into the train this month.

WPX also is flowing roughly 45 percent of its Delaware oil volumes on the joint venture’s Stateline crude gathering system. JV facilities are operated by Howard Energy Partners. Overall, WPX has approximately 80 percent of its Delaware oil on pipe via multiple systems.

“Our midstream portfolio continues to be a distinct competitive advantage for WPX, especially when you consider how we methodically assembled it going back more than three years. We strategically protected our pricing and flow assurance, which is benefitting our business today and will continue to do so,” Gaspar added.

WILLISTON BASIN HIGHLIGHTS

Williston Basin production averaged 63.1 Mboe/d in first-quarter 2019, which was 60 percent higher than 39.5 Mboe/d in the same period a year ago.

Basis differentials for Williston volumes strengthened considerably midway through the first quarter following market imbalances in fourth-quarter 2018. Basis differentials were closer to WTI minus $2 in February and March vs. WTI minus $10 in fourth-quarter 2018 and WTI minus $6 in January.

WPX completed 15 Williston wells during the first quarter, including eight wells in the Three Forks formation and seven wells in the Bakken formation. All were two-mile laterals.

The highest 24-hour rate for the first-quarter Williston completions was 5,628 Boe/d (81% oil) on the Young Bird 34-27HW well. The four-well Young Bird pad has 90-day cumulative production in excess of 495,000 barrels of oil.

Initial peak rates on the two-well Good Voice pad averaged just over 4,000 Boe/d (81% oil). The pad has 60-day cumulative production in excess of 207,000 barrels of oil.

Initial peak rates on the four-well Plenty Sweet Grass pad averaged more than 4,300 Boe/d (81% oil). The pad has 60-day cumulative production of approximately 378,000 barrels of oil.

1Q FINANCIAL RESULTS

Total product revenues of $507 million in first-quarter 2019 were $100 million higher than the same period a year ago. Quarterly oil sales grew 25 percent.

Higher product revenues in first-quarter 2019 vs. a year ago were offset by $207 million of net losses associated with WPX’s hedge book, resulting in the net loss from continuing operations of $48 million.

DD&A, general and administrative expenses, production taxes, and interest expense all declined in first-quarter 2019 on a per-Boe basis vs. a year ago.

Adjusted EBITDAX (a non-GAAP financial measure) increased 56 percent vs. a year ago to $312 million in first-quarter 2019. Reconciliations for non-GAAP financial measures are available in the tables that accompany this press release.

The weighted average gross sales price – prior to revenue deductions – was $52.35 per barrel for oil, $2.60 for natural gas and $16.81 per barrel for NGL during first-quarter 2019.

Over the past three years, cash flow from operations (inclusive of hedge impact) has climbed from $22 million in first-quarter 2017 to $145 million in first-quarter 2018 to $272 million in first-quarter 2019.

WPX’s total liquidity at the close of business on March 31, 2019, was approximately $1.15 billion, primarily from the company’s available revolver capacity.

1Q PRODUCTION

Total production volumes of 155.2 Mboe/d in first-quarter 2019 were 51 percent higher than the same period a year ago. Liquids volumes accounted for 78 percent of first-quarter 2019 production.

Oil volumes of 96,100 bbl/d were 46 percent higher vs. the same period a year ago, led by a 62 percent increase in the Williston Basin over the past 12 months. As previously discussed, first-quarter Delaware volumes were reduced by weather and the absence of Nile Mile Draw production.

WPX completed 46 gross operated wells (40 net) in its two core basins during first-quarter 2019 and participated in another three gross (1 net) non-operated wells in the Delaware Basin.

For the balance of 2019, WPX has 53,000 bbl/d of oil hedged with fixed price swaps at a weighted average price of $54.62 per barrel, 5,000 bbl/d with fixed price calls at a weighted average price of $54.08 per barrel, and 8,000 bbl/d with collars at a weighted average price of $50 for the floor and $60.19 for the ceiling. WPX also has 110,000 MMBtu/d of natural gas hedged at a weighted average price of $3.07 per MMBtu.

For 2020, WPX has 20,000 bbl/d of oil hedged with fixed price swaps at a weighted average price of $59.03 per barrel and 20,000 bbl/d with collars at a weighted average price of $53.33 for the floor and $63.48 for the ceiling.

THURSDAY WEBCAST

The company’s next webcast takes place on May 2 beginning at 10 a.m. Eastern. Investors are encouraged to access the event and the corresponding slides at www.wpxenergy.com.

A limited number of phone lines also will be available at (833) 832-5123. International callers should dial (469) 565-9820. The conference identification code is 9796128.

FORM 10-Q

WPX plans to file its first-quarter 2019 Form 10-Q with the Securities and Exchange Commission this week. Once filed, the document will be available on the SEC and WPX websites.

About WPX Energy, Inc.

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

This press release includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the company expects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the company. Statements regarding future drilling and production are subject to all of the risks and uncertainties normally incident to the exploration for and development and production of oil and gas. These risks include, but are not limited to, the volatility of oil, natural gas and NGL prices; uncertainties inherent in estimating oil, natural gas and NGL reserves; drilling risks; environmental risks; and political or regulatory changes. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. The forward-looking statements in this press release are made as of the date of this press release, even if subsequently made available by WPX Energy on its website or otherwise. WPX Energy does not undertake and expressly disclaims any obligation to update the forward-looking statements as a result of new information, future events or otherwise. Investors are urged to consider carefully the disclosure in our filings with the Securities and Exchange Commission, available from us at WPX Energy, Attn: Investor Relations, P.O. Box 21810, Tulsa, Okla., 74102, or from the SEC’s website at www.sec.gov.

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

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