Strengthening Hold in oil-rich Permian Basin - Report on WPX Energy, Inc.

Jul 29, 2015, 09:35 ET from www.aciassociation.com

NEW YORK, July 29, 2015 /PRNewswire/ --

ACI Association has initiated research coverage on WPX Energy, Inc. (NYSE: WPX). Select highlights from the internally released reports are being made available to the general public (included below), with access to the entirety of the research available to new members.

Today, membership is open to readers on a complementary basis at the following URL: http://www.aciassociation.com/?c=WPX

Highlights from our WPX Report include:

  • WPX acquires RKI Exploration & Production, LLC - On July 14, 2015, oil and gas producer WPX Energy reported that it has entered into a definitive merger agreement to acquire privately held RKI Exploration & Production, LLC for $2.35 billion. The Permian Basin is categorized by several stacked reservoirs, long-lived reserves and high drilling success rates. The deal excludes RKI's Powder River basin assets in Wyoming, which it plans to divest or sell before deal close. Further, WPX aims to increase the rig count in the Permian basin to six from four by the end of the year.
  • Synergies scaled after acquisition - This acquisition would further stretch WPX's drilling inventory to c. 4,600 locations, thereby making WPX an interesting option for investors looking out for high-margin core Permian production. Another benefit of this purchase would be the owned and operated midstream systems which are integrated with E&P activity support lower costs, margin development and long-term optionality. This existing infrastructure has the capacity to support increased volumes. Adding RKI's assets would further diversify WPX's asset portfolio and accelerate liquids growth.
  • Increase in cash margins and attractive returns - This acquisition comes in-line with WPX's long term strategy, which stresses on reducing its reliance on less lucrative natural gas portfolio, as this deal would maximize its returns and margins along with the increased exposure to oil production and oil inventory instead of the earlier gas-weighted portfolio. With RKI's addition, WPX expects oil to account for c. 22% of equivalent production in 2015, 30% in 2016, and 36% in 2017 on a pro forma basis.
  • Agreement terms & funding - The release highlighted that RKI unit holders will be entitled to 40 million shares of WPX stock, valued at c. $470 million. WPX would be financing this acquisition through a combination of long-term debt, additional equity and cash on hand.

To find out how this influences our rating on WPX Energy, Inc., read the full report in its entirety here: http://www.aciassociation.com/?c=WPX

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