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WPX Ups Oil Guidance for 2019; Cuts Debt Load, Talks 2020

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   |    Tuesday,November 05,2019

WPX Energy reported its Q3 results. Below are highlights (for the full release, scroll down below analysis).

2020 (10-15 % below what they did in 2019)

In its call, WPX noted that it plans a 10-15% reduction in activity/spending for 2020 compared to 2019.

  • "I wouldn't guide too far below where we're at today without having all of those things in hand, but know that we have some -- we keep some things in our back pocket, and we'll continue to try and be really creative on how do we continue to improve our investment options.  [We are] running 5 rigs into 4Q, but will bring back a few rigs in 2020."

The company started with 7 rigs running in Q1 2019.

Raising Full Year Oil Guidance for Oil

WPX is raising its oil guidance an additional 4% for 2019 (full year and Q4) - the company expects to hit 109-111 MBOPD.

"We originally forecasted and estimated 5% to 10% exit rate growth from year-end 2019. Now it looks more like 15%. This is good news for now and for later as we enter 2020 with more momentum than we expected. More importantly, we can generate free cash flow next year at $50 WTI and $2.50 NYMEX.

"I'm very pleased to announce that we are raising our fourth quarter oil production guidance to 109,000 to 111,000 barrels per day, up 4% from an estimate we provided during the second quarter conference calls. This also increases our full year guidance to 102,000 to 104,000 barrels per day. Despite this increase in production, as Clay mentioned, we are not changing our fourth quarter capital guidance of 260 million to 275 million, which keeps our full year guidance unchanged as well.

"We expect to hit the midpoint of our February capital guidance and at the same time generate higher-than-expected oil production. Our initial midpoint oil guidance for 2019 was 98,000 barrels of oil a day. With our updated guidance, we've increased this midpoint 5% to 103,000 barrels a day.

As Rick mentioned, we're now forecasting a 15% exit-to-exit growth rate, again, with no impact on capital. "

Debt Reduction

So far this year, WPX Energy noted that it has paid down nearly $300 million of debt.




WPX Energy reported third-quarter oil volumes of 108,600 barrels per day, which was 30 percent higher vs. a year ago and 11 percent higher than second-quarter 2019.

WPX reported unaudited third-quarter income available to common stockholders of $121 million, or income of $0.29 per share on a diluted basis. A year ago, WPX reported a loss of $0.01 per share.

Excluding derivatives and other items, WPX posted adjusted net income from continuing operations in third-quarter 2019 of $38 million, or income of $0.09 per share. A reconciliation accompanies this press release.

Adjusted EBITDAX (a non-GAAP financial measure) for third-quarter 2019 was $352 million, up 22 percent vs. $288 million in the same period a year ago. A reconciliation accompanies this release.

Cash flow from operations, inclusive of hedge impact, was $272 million in third-quarter 2019, which was 21 percent higher than $224 million in the same period a year ago.

Free cash flow for the third quarter was $42 million. Free cash flow for the quarter represents cash flow from operations ($272 million) adjusted for the impact of net changes in assets and liabilities ($34 million) less incurred capital expenditures ($264 million).

CEO Discussion

“Our value proposition at WPX, both financially and strategically, is stronger than ever because of our consistent execution,” said Rick Muncrief, chairman and chief executive officer.

“We generated free cash flow in the quarter, are returning capital to shareholders ahead of schedule and are applying our technical expertise to lower costs and raise margins on barrels produced.

“All of this contributes to an exceptional outlook for the fourth quarter, 2020 and beyond, especially with improved capital efficiency, greater gas capture, lower interest expense and how we’re working to drive our leverage even lower,” Muncrief added.

Recent Events

In August, WPX announced a plan to opportunistically repurchase up to $400 million of its shares over the next 24 months. To date, the company has since repurchased $58 million of its common stock at an average price of $10.16 per share, retiring 5.7 million shares.

During the third quarter, WPX completed tender offers repurchasing $456 million of its outstanding 6.00 percent notes due in 2022 and $94 million of its 8.25 percent notes due in 2023 through a public offering for 5.25 percent notes due in 2027.

These actions reduced WPX’s weighted average interest rate for long-term debt from 6.24 percent to 5.93 percent, effectively lowering its annual interest expense by approximately $4 million going forward. WPX’s next significant maturity does not occur until 2023, which is $406 million.

Raising Q4 and Full Year Outlook

WPX is forecasting stronger fourth quarter oil volumes than originally detailed in its quarter-to-quarter guide for 2019.

This momentum also is driving the anticipated 2019 exit rate higher with no additional capital allocation. WPX originally forecast 5-10 percent growth vs. the 2018 exit rate. WPX now expects this year’s exit rate to grow 15 percent vs. a year ago.

WPX expects fourth-quarter oil volumes of 109-111 Mbbl/d. This also raises WPX’s outlook for full-year 2019 oil volumes to 102-104 Mbbl/d, up from its most recent estimate of 101-103 Mbbl/d.

WPX now expects full-year total production of 162-167 Mboe/d in 2019, up from its most recent estimate of 160-165 Mboe/d.

With one quarter remaining in the year, WPX’s tightened the range for its 2019 total capital development plan to $1,125-$1,250 million. The midpoint remains unchanged from the previous estimate of $1,100-$1,275 million.

Total capital spending in the third quarter was $264 million, predominantly from $233 million in D&C activity for operated wells and $22 million for midstream infrastructure.

Delaware Basin: Volumes Up 28%

WPX’s Delaware production averaged 96.7 Mboe/d in third-quarter 2019, which was 28 percent higher than 75.4 Mboe/d in the same period a year ago.

Oil production of 47.2 Mbbl/d comprised 49 percent of third-quarter total Delaware production. Oil volumes were up 10 percent vs. 42.8 Mbbl/d in the third quarter a year ago.

Third-quarter Delaware NGL production was up 93 percent vs. a year ago. NGL volumes are up significantly in 2019 reflecting the benefit of processing capacity at WPX’s joint venture gas plant in Reeves County, which did not startup until the end of the third quarter last year. Physical natural gas volumes also are up due to increased gas capture and reduced flaring.

WPX’s average realized oil price in the Delaware was WTI minus $0.50 for the quarter, including Midland basis swaps.

WPX’s average realized natural gas price in the Delaware was NYMEX less $0.40 for the quarter, including basis swaps which increased the average realized price by $0.51 per Mcf. WPX also realized $3 million in net commodity management margins, or $0.20 per Mcf, related to further risk management activities around Delaware natural gas pricing exposure.

WPX completed 18 Delaware wells during the third quarter, including nine in the Wolfcamp A interval, five wells in the Third Bone Spring formation and four in the Wolfcamp XY interval.

Two of the third-quarter Third Bone Spring wells were on the CBR 6-7 pad. Both wells had a 24-hour peak rate exceeding 4,300 Boe/d (59% oil), with combined 60-day cumulative production in excess of 214,000 barrels of oil. Sixty-day cumulative Boe for the two wells was nearly 365,000.

Two Wolfcamp A wells on the Pecos State 39-46 pad had 24-hour peak rates of 3,939 Boe/d (54% oil) and 3,819 Boe/d (53% oil).

On the Lindsay 10-15 pad, a Wolfcamp A well hit a 24-hour high of 4,150 Boe/d (54% oil) during initial production, and a Wolfcamp XY well hit 3,528 Boe/d (53% oil).

Following the completion of the second 200 MMcf/d cryogenic processing train at WPX’s 50/50 joint venture gas plant in Reeves County earlier this year, the plant is processing approximately 100 MMcf/d of third-party volumes in addition to WPX volumes.

The joint venture also completed a 16-inch-diamater trunk line that will begin transporting an estimated 40-50 MMcf/d of natural gas from WPX’s Sand Lake acreage position in the Delaware Basin to the Reeves County plant in early 2020.

Williston Basin: Volumes Up 58%

Williston Basin production averaged 76.8 Mboe/d in third-quarter 2019, which was 58 percent higher than 48.5 Mboe/d in the same period a year ago.

WPX completed 26 Williston wells during the third quarter, including 14 wells in the Bakken formation and 12 wells in the Three Forks formation.

The highest 24-hour rate for the third-quarter Williston completions was 5,664 Boe/d (81% oil) on the Bird Bear 35-26HB well. The six-well pad averaged nearly 4,600 Boe/d (81% oil) per well during 24-hour initial highs. Thirty-day production averaged 2,851 Boe/d per well.

Initial peak rates on the seven-well Lion pad averaged more than 3,800 Boe/d (81% oil) per well. Two of the wells on the pad hit 24-hour peak rates of 4,237 Boe/d.

The four-well Sweet Grass Woman pad also averaged nearly 3,800 Boe/d (81% oil) per well, led by the 22-15HD well that hit a 24-hour peak rate of 4,381 Boe/d.

WPX also drilled a Williston well in less than nine days during the quarter. The company drilled the St. Anthony 9-16-HY well in 8.63 days from spud to rig release with a lateral length of 9,886 feet.

Q3 Financials

Total product revenues of $581 million in third-quarter 2019 were five percent higher than the same period a year ago. Quarterly oil sales grew seven percent.

Total product revenues of $1,646 million during the first three quarters of 2019 were 11 percent higher than $1,481 million during the same period in 2018.

For the first three quarters of the year, WPX posted net income from continuing operations attributable to common shareholders of $378 million, or income of $0.89 per share on a diluted basis.

Adjusted net income from continuing operations for the first three quarters of 2019 was $97 million, or income of $0.23 per share. A reconciliation accompanies this press release.

During the third quarter, DD&A, lease operating expenses, taxes and G&A expense all declined on a per-Boe basis vs. the most recent quarter.

For the first three quarters of 2019, adjusted EBITDAX (a non-GAAP financial measure) was $1,003 million, or 29 percent higher than $775 million for the same period in 2018. Adjusted EBITDAX has now climbed for six consecutive quarters. 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 and derivatives – was $54.25 per barrel for oil, $1.80 for natural gas and $11.92 per barrel for NGL during third-quarter 2019.

WPX’s total liquidity at the close of business on Sept. 30, 2019, was approximately $1.5 billion, including cash, cash equivalents and nearly all of its $1.5 billion available revolver capacity. WPX had no outstanding revolver borrowings at the end of the quarter, with the exception of outstanding letters of credit.

Q3 Production

Total production volumes of 173.4 Mboe/d in third-quarter 2019 increased 9 percent vs. second-quarter 2019 and were 40 percent higher than the same period a year ago. Liquids volumes accounted for 78 percent of third-quarter 2019 production.

Average Daily Production




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NGLs (Mbbl/d)




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Natural gas (MMcf/d)




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Total Production (Mboe/d)













WPX completed 44 gross operated wells (41 net) in its two core basins during third-quarter 2019 and participated in one gross (0 net) non-operated well in the Williston Basin.

For the balance of 2019, WPX has 83,000 bbl/d of oil hedged with fixed price swaps at a weighted average price of $56.72 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 with fixed price swaps at a weighted average price of $3.07 per MMBtu for the balance of 2019.

For 2020, WPX has 55,000 bbl/d of oil hedged with fixed price swaps at a weighted average price of $57.03 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.


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