WPX Energy slashes spending, cuts rigs
TULSA, Oklahoma -- WPX Energy has announced a 2015 capital investment plan of approximately $725 million, in line with the company’s projected operating cash flow.
The budget is roughly half the amount of its capital plan last year, excluding acquisition capital.
As part of its long-term strategy, WPX will continue to diversify its historically gas-weighted portfolio. WPX’s oil production grew 56% in 2014 year over year, far exceeding its plan for 40% growth last year.
In fourth-quarter 2014, oil volumes rose 6,500 bpd to approximately 32,300 bpd, accounting for nearly 20% of the company’s equivalent production. This marked a 25% sequential-quarter increase over third-quarter 2014 oil production of 25,800 bpd.
“Our capital plan is prudent, disciplined and consistent with our long-term focus,” said Rick Muncrief, WPX President and CEO. “At the same time, we have financial and operational flexibility because of how well we executed over the past year, completing asset sales, increasing oil volumes and heavily hedging our 2015 production at very favorable prices."
“We’ll stay primed to accelerate development, even as we take appropriate steps to respond to current prices,” Muncrief added.
WPX expects its oil production to climb again in 2015. The company is targeting 15% to 20% oil growth this year even as it decreases capital spending and builds an inventory of wells awaiting completion for when commodity prices are more favorable.
The company’s expected increase in oil production this year will be offset, in part, by an expected decline of about 4% in overall equivalent production from reduced development activity—normalized for divestitures over the past year.
WPX has hedged approximately three-fourths of its anticipated 2015 natural gas production at a weighted average price of $4.10/MMbtu and approximately two-thirds of expected oil production this year at an average price of $94.88/bbl.
WPX also recently generated nearly $600 million in cash through selling its international interests and part of its operations in the Marcellus shale. The company is focusing on its core assets in the Williston, San Juan and Piceance basins.
The company’s 2015 capital program includes $275 million to $300 million for San Juan basin development, $200 million to $225 million for Williston basin activity, $200 million to $225 million for Piceance basin development and $25 million for land and exploration.
WPX started the year with five rigs in the Williston basin and is ramping down to one rig by late spring for the balance of the year.
WPX started the year with three rigs in the San Juan basin and already ramped down to two rigs for the balance of the year.
WPX plans to deploy three rigs in the Piceance basin for the balance of the year, including a rig for Niobrara shale resource assessment. WPX started the year with eight rigs in the Piceance basin.
“Head winds bring challenges and opportunities. We’re ready for both. It’s why we have a long-term plan to reshape WPX and grow our margins and cash flow. Margin expansion comes from diversifying our production and right-sizing our cost structure,” Muncrief added.
The company’s 2015 guidance and plans are based on NYMEX commodity price assumptions of $55/bbl oil and $3.00/MMbtu natural gas.
WPX anticipates that the cash expenditures it reports in 2015 will exceed $725 million. This difference primarily relates to capital costs incurred in 2014 but paid for in 2015.
