WPX Energy (ticker: WPX) has closed the San Juan Basin oil play sale to Enduring Resources IV, LLC for $700 million. A significant portion of the proceeds are slated for debt reduction, WPX said, and the company now believes it can reduce its net debt/EBITDAX to a target level of 1.5x during 2019.
The transaction completes WPX’s exit from operations in the San Juan Basin. WPX said it has confidence in its two remaining core positions in the Delaware (Permian) and Williston basins.
“Our path forward is clear and compelling. It’s about consistent execution, sticking with our multi-year plan and continuing to create value by looking ahead,” said Rick Muncrief, WPX chairman and CEO.
WPX’s production is now approximately 80% liquids (oil and NGL) and 20% natural gas. Five years ago, it was the opposite, at 80% gas and 20% liquids – WPX said it has transformed its portfolio through nearly $8 billion worth of transactions.
WildHorse Resource Development (ticker: WRD) is now 100% in the Eagle Ford and Austin Chalk after the $217 million sale of its North Louisiana assets. The company also completed its regular semi-annual borrowing base redetermination, with the sale, the borrowing base has now increased to $1.05 billion, up from $875 million.
“The sale of our North Louisiana assets completes the transition of WRD to a pure-play in the Eagle Ford and Austin Chalk,” said CEO Jay Graham. “As a pure play, we will be able to focus entirely on our high-return Eagle Ford and Austin Chalk assets and projects such as the construction of our in-field sand mine.”
“Furthermore, the proceeds from the North Louisiana sale and our increased borrowing base will help to fund our Eagle Ford program and bridge the gap to becoming free cash flow positive in the near future. In our 2018 program, we will extensively test various aspects of our completion design and will bring online 60% of our wells on four-well pads testing a variety of spacing assumptions,” Graham said. “With a 404,000-net acre position, this year is about setting the groundwork on our completion and pad design in order to methodically develop this tremendous asset with over 30 years of inventory.”
2018 plan
WRD projects 2018 average daily production between 46-49 MBOEPD (consisting of 31-35 Mbbls/d of oil, 45-55 MMcf/d of natural gas and 5 – 7 Mbbls/d of NGLs). At the mid-point of guidance, this represents a total company production growth rate of 54% and an Eagle Ford production growth rate of 90% over 2017’s average daily production.
WRD estimates a fiscal year 2018 D&C CapEx budget of approximately $700-$800 million. Drilling and completion activity will be weighted toward the first half of 2018, WRD said, as the company transitions from seven rigs at the beginning of the year, to four rigs at mid-year, for an average of 4.8 rigs in the Eagle Ford and Austin Chalk during 2018.
WRD said it has no commitments on its drilling rig fleet. In addition, WRD expects to transition from four completion crews in the first half of the year, to three completion crews in the second half of 2018.
The budget also allocates between $65-$75 million of non-D&C capital expenditure for the acquisition and construction of WRD’s recently announced sand mine, which is expected to produce savings of $400,000 to $600,000 per well upon completion by the first quarter of 2019.
WRD expects its capital budget to be funded by cash on hand, the proceeds of the North Louisiana divestiture and borrowings under its revolving credit facility.
For the full year 2018, WRD expects to spud 100 to 110 gross wells and to bring online 100 to 110 gross wells, which include 90-100 Eagle Ford wells and eight Austin Chalk wells. For wells brought online in 2018, WRD estimates an average working interest of approximately 93% in the Eagle Ford and 96% in the Austin Chalk.
