WPX Agrees to Form JV to Develop Permian Midstream Assets
WPX to receive $300MM cash, $132MM capital carry and retain 50%
ownership in $850MM+ entity at closing
TULSA, Okla.--(BUSINESS WIRE)--
WPX Energy (NYSE:WPX) has signed a strategic partnership with Howard
Energy Partners to jointly develop oil gathering and natural gas
processing infrastructure in the Stateline area of the Permian’s
The joint venture with Howard is designed to support WPX’s drilling
operations in the Stateline area, representing 50,000 net acres, or 37
percent of WPX’s roughly 135,000 net acre position in the Delaware.
The joint venture includes crude oil gathering assets already under
construction and a planned natural gas processing complex. It does not
include WPX’s natural gas and water gathering systems in the Stateline
area, along with midstream rights to its remaining acreage position in
In a separate transaction, WPX secured additional takeaway capacity for
its Delaware Basin natural gas volumes and an equity position in the
related pipeline. Further details are provided in this release.
JOINT VENTURE HIGHLIGHTS
50/50 joint venture between WPX and Howard Energy Partners
Howard Energy Partners will finish constructing the JV assets and
serve as operator
Dedication of 50,000 acres represents 37% of WPX’s total acreage in
Transaction implies a value of $863 million for Stateline oil
gathering and gas processing projects
WPX receiving $300 million upfront from Howard Energy Partners
Howard Energy Partners to fund the first $263 million of JV capital
expenditures, including a $132 million carry for WPX
No minimum volume or drilling commitments
The joint venture will complete the buildout of a new crude oil
gathering system, already started by WPX in the basin, and begin
constructing a new cryogenic natural gas processing complex with a
planned initial capacity of 400 MMcf/d. The parties plan to seek out
third-party volumes in an area of mutual interest in the Delaware Basin.
WPX has a 50 percent voting interest in the joint venture and
operational influence. The transaction value of $863 million for the new
joint venture is based on the cash to WPX, the capital carry and WPX’s
As previously stated, WPX is retaining sole ownership of its Stateline
natural gas and water gathering systems which consist of more than 375
miles of scalable existing infrastructure.
WPX believes the retained assets are worth considerably more than the
$500 million of implied value at the time of its acquisition of RKI
Exploration & Production nearly two years ago.
EXPLAINING THE STRATEGY
“Our approach to supporting our growth plans in the Delaware Basin
uniquely differentiates WPX,” said Rick Muncrief, WPX’s chairman,
president and chief executive officer.
“As a producer, this is a bold and innovative way to lay a well-defined
path for our expected volumes and create an additional platform for
generating shareholder value. Today’s agreement breaks new ground on
“For starters, our forward-looking action gives our long-term Delaware
development a competitive advantage. Second, we’re looking at the bigger
picture and how to extend value creation beyond the drill bit by
creating a premier Delaware midstream service provider.
“We believe the Howard team has the right skills, capabilities and focus
to make this joint venture a success and we’re excited to work with
them,” Muncrief said.
This transaction builds on WPX’s successful track record for creating
value from the infrastructure it develops around its operations. The
company previously sold gathering systems in the Williston and San Juan
The parties expect to close the transaction in the third quarter subject
to certain closing conditions. Prior to closing, WPX and Howard will
begin integrating efforts to continue to build out the crude oil
gathering system and begin work on the cryogenic processing plant.
WPX already has installed approximately half of the planned 50-mile
crude gathering system that initiated service in late 2016. WPX
currently has 40 wells tied in, some of which are awaiting completion
before starting deliveries into the system.
The trunkline is designed to have a capacity of approximately 125,000
barrels of oil per day. The parties expect to complete the project in
the first half of 2018 and believe it can be expanded for other
commercial opportunities with minimal capital investment through
additional horsepower and line looping.
The parties expect to complete the first 200 MMcf/d train for the
cryogenic natural gas processing complex in the first half of 2018. The
parties plan to add a second train to double the capacity by the middle
More Delaware Takeaway Capacity
WPX is active in securing long-term takeaway capacity in the basin for
its associated gas production. As previously announced, WPX recently
signed an agreement to ship up to 200,000 MMBtu/d of gas from the Waha
hub to Katy, Texas, starting in November of this year.
WPX also just completed a long-term agreement with WhiteWater Midstream,
which provides WPX with 300,000 MMBtu/d of natural gas capacity from the
Stateline area to Waha and 10 percent ownership in the related Agua
Blanca Pipeline. As part of the agreement with WhiteWater, WPX has the
right to increase its capacity to 500,000 MMBtu/d and its ownership up
to 20 percent.
Agua Blanca will initially consist of 75 miles of 36-inch diameter pipe
with a capacity of 1.25 Bcf/d, expandable to 1.75 Bcf/d. WhiteWater
expects to accept first volumes from the Stateline area in the first
half of 2018.
Barclays acted as financial advisor to WPX on the joint venture
transaction. Holland and Hart served as the legal advisor. Investors are
encouraged to access a slide presentation about the joint venture at www.wpxenergy.com.
Howard Midstream Energy Partners, LLC (dba Howard Energy Partners) is
based in San Antonio and is led by Mike Howard, chairman and CEO. The
company owns and operates natural gas gathering and transportation
pipelines, natural gas liquids processing plants and other facilities in
Texas and Pennsylvania. More information is available at www.howardenergypartners.com.
WPX has posted double-digit oil volume growth each of the past five
years. The company is active in the Delaware, Williston and San Juan
basins. The Delaware Basin is the western portion of the greater Permian
Basin. More information is available at www.wpxenergy.com.
This press release includes “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995. All
statements, other than statements of historical facts, included in this
press release that address activities, events or developments that the
company expects, believes or anticipates will or may occur in the future
are forward-looking statements. Such statements are subject to a
number of assumptions, risks and uncertainties, many of which are beyond
the control of the company. Statements regarding future drilling
and production are subject to all of the risks and uncertainties
normally incident to the exploration for and development and production
of oil and gas. These risks include, but are not limited to, the
volatility of oil, natural gas and NGL prices; uncertainties inherent in
estimating oil, natural gas and NGL reserves; drilling risks;
environmental risks; and political or regulatory changes. Investors
are cautioned that any such statements are not guarantees of future
performance and that actual results or developments may differ
materially from those projected in the forward-looking statements. The
forward-looking statements in this press release are made as of the date
of this press release, even if subsequently made available by WPX Energy
on its website or otherwise. WPX Energy does not undertake and
expressly disclaims any obligation to update the forward-looking
statements as a result of new information, future events or otherwise.
Investors are urged to consider carefully the disclosure in our
filings with the Securities and Exchange Commission, available from us
at WPX Energy, Attn: Investor Relations, P.O. Box 21810, Tulsa,
Okla., 74102, or from the SEC’s website at www.sec.gov.
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Source: WPX Energy Inc