Plan Emphasizes Capital Efficiency, Oil Growth, Scalability and Culture Change
Key to the company’s strategy are three core resource plays in
“We’re confident we have the right building blocks in the
WPX already is executing on its strategy by completing its first two
7,500-foot laterals in the San Juan’s
Ultimately, WPX believes that its strategy gives it the opportunity to increase oil production five-fold and triple its operating margins and company value by the year 2020 compared to its results last year.
During its spinoff more than two years ago, WPX’s portfolio consisted of
assets in eight areas – seven domestic plays along with South American
interests through ownership in
After divesting its properties in
The balance of properties is either in the process of sale or targeted
for divestiture. WPX previously announced the sale of its coalbed
methane assets in
Within its three core resource plays, WPX will prioritize capital based on the highest long-term returns. This includes advancing the company’s oil development and shifting capital within basins from historical areas of emphasis to new ones with greater opportunity. For example:
WPX’s goal for its annual capital program is to have at least a 30
percent internal rate of return at reasonable commodity price
assumptions. WPX’s highest returns today are in the
WPX expects to maximize returns and margins by increasing the amount of
oil production in the company’s historically gas-weighted portfolio.
In 2012, oil accounted for 8 percent of WPX’s equivalent production. In 2013, oil accounted for 10 percent of WPX’s equivalent production. During second-quarter 2014, oil comprised 14 percent of equivalent volumes.
Over the same time frame, oil sales – as a percentage of WPX’s total product revenues – have risen from 23 percent to 37 percent.
“Here’s the fundamental question I hear: ‘Are you a gas company or are you going to be an oil company?’ For WPX, it’s not either or. We’re both,” Muncrief said.
“With the depth we have in our gas reserves, we like the optionality it gives us. We also believe that our gas is going to be advantaged on pricing because of the access we have to premium western markets.
“At the same time, increasing our oil output brings significant value to our stockholders. Ideally, oil will account for more than 25 percent of our total volumes as we execute on our strategy. That’s going to require us to achieve a five-fold increase in our oil production compared to what we did domestically last year.”
WPX has an established leadership position in the
Along these lines, WPX has taken its Gallup Sandstone oil exploration
project in the
“Scale drives efficiency,” Muncrief added. “All three of our core resource plays have opportunities to increase returns through cost reductions and other operational efficiencies, especially with cycle times, GP&T expense and D&C costs.
“By driving down development costs, we’re increasing our amount of available capital. That can be a sizeable number considering that there are opportunities to save anywhere from a quarter million dollars per well to a million dollars per well,” Muncrief said.
For example, WPX plans to improve its drilling economics in the
Additionally, WPX expects to increase inventory through oil-focused exploration and ongoing resource assessment. WPX plans to test potential for inventory growth in all three of its core basins.
“The value in our strategy comes down to how well we execute. Changing how we think about our assets and how we manage our business are critical to our success,” Muncrief added. “The greatest change at WPX may very well come from within.”
Accountability, greater risk tolerance, a cost-conscious mindset, faster decision-making, a spirit of tenacity and reduced complexity are an integral part of WPX’s culture change.
WPX is taking steps to re-align its organizational structure with the company’s multi-year strategy. These actions include creating a leadership position for business development, embedding additional staff within the resource plays, and consolidating some functions such as engineering, supply chain management and exploration, similar to how WPX streamlined its drilling team in 2013.
WPX also recently completed an early retirement program. More than 100 people accepted offers for early retirement. Upon the completion of pending and potential asset sales, G&A costs will be further affected.
“Our mission is aggressive and measurable. By casting a vision and setting out our strategy, we’re defining what success looks like and providing a means to track our progress. This is part of creating a high accountability culture at WPX and focusing on our long-term value proposition,” Muncrief said.
WPX management will discuss its company vision and business strategy
during a webcast starting at
A limited number of phone lines will be available at 877-201-0168. International callers should dial 647-788-4901. The conference identification code is 7437634. The slides for the webcast are available for download today 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
The SEC’s rules prohibit us from filing resource estimates. Our resource estimations include estimates of hydrocarbon quantities for (i) new areas for which we do not have sufficient information to date to classify as proved, probable or even possible reserves, (ii) other areas to take into account the low level of certainty of recovery of the resources and (iii) uneconomic proved, probable or possible reserves. Resource estimates do not take into account the certainty of resource recovery and are therefore not indicative of the expected future recovery and should not be relied upon. Resource estimates might never be recovered and are contingent on exploration success, technical improvements in drilling access, commerciality and other factors.
Kelly Swan, 539-573-4944
David Sullivan, 539-573-9360