WPX Energy to Buy Felix Energy for US$2.5 billion
Independent energy producer WPX Energy revealed Monday that it will purchase Felix Energy for US$2.5 billion.
The purchase price consists of US$900 million in cash, subject to closing adjustments, and US$1.6 billion in WPX stock issued to the seller.
The company said it plans to fund the cash portion through issuance of US$900 million of senior notes on an opportunistic basis.
WPX intends to implement a dividend post-closing, targeting approximately US$0.10 per share on an annualized basis at initiation. The transaction is expected to close early in the second quarter of 2020.
Felix Energy is one of the highest quality Delaware basin operators, according to WPX, which noted that the business has approximately 1,500 gross undeveloped locations in the eastern portion of the basin.
WPX said the acquisition and dividend programme follow other steps the company took in 2019 to enhance its value proposition, “including reducing net debt, executing attractive midstream monetisations, launching a share buyback programme and generating free cash flow”.
The company also stated that the acquisition is consistent with all of the tenets in WPX’s five-year vision for shareholders that the company introduced in November during its third-quarter report.
“Meeting the five-year targets we communicated is the absolute standard and benchmark for any investment we make,” WPX Chairman and Chief Executive Officer Rick Muncrief said.
“Now we can accomplish these objectives for shareholders more quickly and efficiently with the irrefutable benefits of the Felix transaction,” he added.
“Delivering on our plan ahead of schedule in a highly de-risked, leverage-neutral manner is consistent with our opportunistic approach,” Mr Muncrief continued.
On a pro forma basis, WPX expects to generate “significant” free cash flow in 2020 at US$50 oil. Following the acquisition, cash flow per share, earnings per share, free cash flow per share, return on capital employed, and cash margins are all expected to increase.
WPX has core positions in the Permian and Williston basins. According to its website, the company built its Permian basin position through acquisitions of RKI Exploration & Production and Panther Energy, as well as grassroots leasing and the formation of a midstream joint venture with Howard Energy Partners.
In May this year, WPX revealed that a subsidiary of WPX and its joint venture partner in the Oryx II pipeline completed the sale of the project. WPX received net proceeds of approximately US$350 million for its 25 percent equity interest after adjusting for debt financing related to Oryx II.
Source: Rigzone