WPX execs explain company transformation in Q1 update

By Luke Geiver | May 11, 2016

WPX Energy has entered a new era, according to the leadership team for the exploration and production company. During its Q1 investor update, WPX leadership explained the transformation of the company, views on oil prices and future plans.

WPX Energy’s Transformation

Only one year ago, WPX was predominately a Piceance Basin natural gas producer, Rick Muncrief, president and CEO, said. “Today that asset isn’t part of our current portfolio.”

Two years ago, oil accounted for 12 percent of the company’s total hydrocarbon volumes. In 2016, oil represents more than half of WPX’s asset volumes, and during the first quarter, the company produced its highest ever production total of 41,500 barrels of oil per day between its assets in the Permian Basin, Williston Basin and San Juan Basin.

Liquidity at WPX two years ago included $16 million of cash on hand and $1 billion in liquidity. Today, the company has $1.6 billion in liquidity and roughly $600 million in cash on hand.

Bakken Plans

In the Williston Basin, WPX is currently running one drilling rig. The company completed a six-well pad in March. Three wells on the pad were stimulated with 10 million pounds of proppant, while the other wells were completed using only 6 million pounds of proppant. According to Clay Gaspar, chief operating officer, by alterning the number of stages—stage facing, stage size, carrying fluid and pump rate—WPX was able to match the performance of the 10 million pound well with that of the smaller proppant loaded well. “We will continue to drive well costs down by dialing back fluid and with a few more tricks we have up our sleeves,” he said.

The company currently has 15 drilled but uncompleted wells and will defer completions on any new wells for another few months. The DUC number could increase to 29 in the next few months, the company said.

Thoughts On Oil Prices

According to Muncrief, oil prices should have never dropped as far as they have. “Trading hysteria definitely contributed to the slide,” he said. “Show me another commodity that had only a 1.5 percent of excess over demand where the price dropped by two-thirds. That will ultimately correct itself.”

Along with trading hysteria, Muncrief also told investors that geopolitical risks do not appear to be built into current pricing and that as prices continue to recover, some energy-related entities will be heavily focused on their respective balance sheets instead of expansion.

For Gespar, the operations team is seeing attractive financial returns on its operations at current pricing. Right now, WPX is wrestling with the finances of its overall operation. “I think from my side, it’s all green lights. We’re ready to go,” he said, adding that instead, however, WPX will “stage into” activity increases.

Future Strategy

Although WPX has been very active in the acquisitions and divestitures marketplace in the past two years, Muncrief said the company is currently pleased with all three of its assets (Williston Basin, Permian Basin, San Juan Basin). “Permian is obviously going to be with us for a long time. We really love our Bakken position, and it’s obvious why if you look at our performance there and our working interest,” he said.