WPX Energy to sell working interest for $355M

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TULSA (JR) – WPX Energy has agreed to sell a working interest in certain of its existing Piceance Basin wells to Legacy Reserves for $355 million in cash.

Legacy is a master limited partnership based in Midland, Texas.

The agreement also provides Tulsa-based WPX with 10-percent ownership in a newly created class of incentive distribution rights with Legacy. WPX has the opportunity to increase its ownership to 30 percent, contingent upon completing other transactions.

The sale is expected to close during the second quarter.

The working interests represent 279 billion cubic feet equivalent of reserves, or 9 percent of WPX’s Piceance proved reserves at the end of 2013.

The average production for the working interest over the next five years is expected to be 71 million cubic feet equivalent per day.

“We see tremendous benefits here on multiple fronts that are all accretive to our outlook,” said Jim Bender, WPX president and CEO. “First, the sales price reflects an attractive valuation of our company’s most important and largest asset – our Piceance Basin position. Second, the cash largely fills the gap in our 2014 capital plan.”

The agreement provides Legacy with 30 percent of WPX’s working interest in proved developed producing Piceance wells that were drilled before 2009. The working interest increases to 37.5 percent in 2015 and 42 percent in 2016.

WPX’s undeveloped locations in western Colorado’s Piceance Basin – as well as the production and reserves associated with its recent Niobrara Shale natural gas discovery – are not included in the transaction. WPX has more than 12,000 remaining drillable locations in the Piceance.

WPX expects to invest $475 million to $495 million in its Piceance Basin properties during 2014.

WPX Energy also on Tuesday announced net income for the first quarter of $18 million, or 9 cents per share, compared with a net loss of $116 million, or 58 cents per share, for the first quarter of 2013.

A 44-percent increase in domestic natural gas revenue, a 34-percent increase in domestic oil revenue and higher gas management margins drove the net profit.

Revenue for the quarter totaled $987 million, up from $631 million a year earlier.