WPX Energy (NYSE: WPX) today announced a 2014 capital plan of $1.47 billion (midpoint), with approximately 85 percent of spending allocated to Williston, Piceance and San Juan Gallup development.
- 39 percent planned increase in domestic oil volumes
- 62 Williston Basin oil wells (gross) planned – an increase of 25 percent vs. 2013
- 29 San Juan Gallup oil wells planned – nearly doubling 2013 activity
- Recent transactions increase Gallup oil acreage by 40 percent to 43,000 acres
- 285 natural gas wells (gross) planned in the Piceance, including up to 10 Niobrara wells
- 6 percent expected exit rate growth in the Piceance vs. 2013 exit rate
WPX expects these investments to drive an estimated 2014 December exit rate of 1,310 MMcfe/d in total production, which is 5 percent higher than its 2013 exit rate. Oil and liquids are expected to account for 25 percent of WPX’s 2014 exit rate.
The 2014 plan represents a 20 percent capital increase vs. 2013 spending, driven by larger investments in domestic oil drilling. More than half of WPX’s planned 2014 investments are in domestic oil properties.
|Capital Plan (in millions)||1Q||Full Year|
|Piceance||$100 - $110||$475 - $495|
|Williston||$140 - $150||$580 - $600|
|San Juan Gallup||$35 - $40||$155 - $180|
|Appalachia||$15 - $20||$20 - $30|
|Other (PRB, legacy)||$0 - $5||$10 - $15|
|Land||$10 - $20||$75 - $85|
|Exploration||$15 - $20||$25 - $30|
|Total Domestic||$315 - $365||$1,340 - $1,435|
|International (self-funding)||$20 - $30||$80 - $90|
|Total Capital||$335 - $395||$1,420 - $1,525|
WPX expects to drill 376 gross operated wells in 2014 by deploying an average of 15 to 16 rigs. Compared with 2013, this represents a two-rig increase in the Piceance for a total of nine rigs, an increase of one rig in the Williston for a total of five, and an increase of one rig in the San Juan Gallup for a total of two.
|Rig Count||1Q||Full Year Avg.|
|San Juan Gallup||1.7||1.8|
“Increased oil volumes, efficient development of our resource base and enhanced balance sheet flexibility will help drive increased cash flows and better overall results,” said Jim Bender, president and chief executive officer.
“We have increased our hedge positions as commodity prices improved and continue to evaluate all aspects of our operations to drive cost reductions.
“And as we’ve previously announced, we continue to pursue asset sales and the potential formation of an MLP. Achieving these objectives will help us meet our strategic goals, enhance our ability to drive shareholder value and eliminate the funding gap in our current capital plan.
“We know we have a lot of work ahead of us in 2014. We’re committed to taking actions that will improve our financial and operating performance,” Bender added.
“As for our production outlook, we plan to grow domestic oil by nearly 40 percent and our Piceance exit rate by 6 percent. However, this is offset by the production decline in long-lived natural gas assets and the impact of lower ethane recovery rates on NGL volumes,” Bender said.
WPX is forecasting total production on an equivalent basis of 1,246 MMcfe/d to 1,259 MMcfe/d for full-year 2014, with a December exit rate that represents a 5 percent increase over the 2013 exit rate.
While total production levels for 2014 are expected to remain flat compared to total 2013 production levels, domestic oil volumes are expected to increase nearly 40 percent.
|Production Forecast||1Q||Full Year||Exit Rate*|
|Natural Gas - MMcf/d||952 - 962||960 - 969||978|
|Oil - Mbbl/d||23.0 - 23.3||28.1 - 28.5||34.5|
|NGL - Mbbl/d**||19.0 - 19.2||19.6 - 19.9||20.8|
|Total - MMcfe/d||1,204 - 1,217||1,246 - 1,259||1,310|
|* The exit rate is an estimate for the daily production average for December.|
|**Assumes a 37% ethane recovery rate in NGL volumes.|
For 2014, WPX’s commodity price point of view is $4 per Mcf of natural gas; $90 per barrel for crude oil and $41.59 per composite NGL barrel. WPX expects a mixture of 37 percent ethane, 28 percent propane, 8 percent isobutane, 7 percent normal butane and 20 percent natural gasoline in its NGL volumes.
|% of Net Realized Price||1Q||Full Year|
|Natural Gas - NYMEX||83% - 86%||81% - 87%|
|Oil - WTI||83% - 86%||84% - 87%|
|NGL - Mont Belvieu||76% - 80%||76% - 80%|
Percentage of realized price ranges for NYMEX, WTI & OPIS exclude
|hedges, but include basis differential and revenue adjustments.|
NIOBRARA SHALE UPDATE
WPX is working to double its Niobrara delineation drilling in 2014, with up to 10 wells expected. Combined with previous Niobrara activity, this will serve to delineate 80 percent of WPX’s Valley acreage. WPX’s 2014 Piceance plan includes approximately $75 million for Niobrara activity.
During its first year of production, WPX’s initial Niobrara Shale discovery well produced more than 2.2 billion cubic feet of natural gas. The discovery well is currently producing at a rate of 3 MMcf/d.
WPX’s second horizontal Niobrara well – completed at the end of September – produced 0.7 billion cubic feet of natural gas in its first four months and is currently producing 4.6 MMcf/d.
A third Niobrara horizontal well that was drilled in August 2013 will be sidetracked or re-drilled due to a casing issue in the lateral section that occurred before completion operations commenced.
WPX drilled two additional Niobrara delineation wells in the fourth quarter. The first is a vertical test well located 12 miles east of the discovery well in the heart of the Rulison field. This well reached a total depth of 13,797 feet and penetrated the entire Niobrara section. WPX has begun testing and completion of multiple benches of the Niobrara in this well, where reservoir pressure initially was measured at 13,800 psi.
The fourth Niobrara horizontal well – located three miles north of the discovery well – had a total vertical depth of 11,000 feet and reservoir pressure of 10,400 psi. Due to higher than anticipated surface operating pressures, WPX decided to stop the drilling of the lateral at 1,000 feet and install casing.
After just four frac stages, the well flowed at a peak rate of 6.4 MMcf/d from the 1,000 foot lateral at 8,200 psi flowing pressure. WPX plans to ultimately achieve 5,000-foot laterals in the area north of the discovery well, which had a peak rate of 16 MMcf/d from a 4,600-foot lateral at a flowing pressure of 7,300 psi.
Due to the high reservoir pressures experienced in Niobrara drilling so far, WPX plans to bring a higher-rated rig into the basin during the second quarter to continue delineation activity.
GALLUP OIL UPDATE
WPX plans to invest approximately $160 million to further develop its Gallup Sandstone oil discovery in New Mexico’s San Juan Basin. This will fund the drilling of 29 planned wells in 2014, nearly doubling the activity level (15 wells) from a year ago.
WPX has increased its land position in the Gallup play approximately 40 percent by securing rights to another 12,000 acres. WPX now has 43,000 net acres under lease. The company’s 2014 capital plan includes funds for continuing to increase this position.
WPX recently added a second rig in the Gallup, which spud its first well on Feb. 6. The first rig just finished drilling the final well on a three-well pad, with a zipper frac set for mid-February. This is WPX’s first pad drilling in its Gallup development.
WPX’s average drilling time on its Gallup oil wells is 16.7 days. WPX’s fastest Gallup well was drilled in just 14.6 days – more than twice as fast as the company’s first Gallup well.
WPX has now drilled a total of sixteen Gallup oil wells, including the original four exploratory wells. Thirteen of the wells are on production, with the balance scheduled for completion in February.
WPX’s first 13 Gallup oil wells have flowed – on average – at 388 barrels of oil per day over their first 30 days, or 475 barrels per day on an equivalent basis. The 13 wells had – on average – a peak rate of 727 barrels per day on an equivalent basis.
The company had a December 2013 Gallup exit rate of 2,489 bbl/d, or about 100 barrels per day higher than its planned target of 2,388 bbl/d. On an equivalent basis, WPX averaged 2,875 boe/d during December vs. a forecast of 3,400 boe/d due to a lower gas-to-oil ratio.
For 2013, WPX had cumulative Gallup oil volumes of approximately 290,000 barrels during the year. For 2014, WPX expects to triple its 2013 cumulative oil volumes in the Gallup.
2014 HEDGING ACTIVITY
WPX has 323,082 MMBtu per day of its 2014 domestic natural gas production hedged at a weighted average price of $4.21 per MMBtu; an additional 183,836 MMBtu per day hedged at a weighted average floor of $4.04 with a cap of $4.66; and 50,000 MMBtu per day capped at a monthly settlement price of $4.24 per MMBtu.
WPX has 13,243 barrels per day of its 2014 domestic oil production hedged at an average price of $94.82 per barrel. Approximately 27 percent – or 5,013 barrels per day – of WPX’s planned 2014 NGL volumes are hedged. The NGL hedges are for expected ethane, propane, butanes and natural gasoline volumes.
WPX is providing the following estimates on a consolidated per-unit basis for 2014 which includes domestic and international expenses:
|Consolidated Expenses||1Q||Full Year|
|$ per Mcfe|
|LOE||$0.74 - $0.76||$0.73 - $0.75|
|DD&A||$1.85 - $1.90||$1.92 - $2.02|
|GP&T||$0.97 - $1.01||$0.93 - $0.98|
|SG&A||$0.67 - $0.69||$0.63 - $0.67|
|Production tax||$0.38 - $0.42||$0.38 - $0.43|
|$ in Millions|
|Gas Management (Inc) Exp||($20) - ($25)||$45 - $55|
|Exploration||$25 - $30||$70 - $80|
|Interest Expense||$29 - $30||$130 - $140|
|Equity (Earnings) Loss||($4) - ($6)||($20) - ($25)|
|Tax Rate||1Q||Full Year|
|Corporate Tax Rate||33% - 37%||33% - 37%|
WPX management will discuss the company’s 2014 outlook and 2013 year-end results during a Feb. 27 webcast that will be broadcast at 10 a.m. Eastern on www.wpxenergy.com.
About WPX Energy, Inc.
WPX Energy is an independent exploration and production company formed during a spinoff two years ago. Overall, WPX has more than 30 years of experience in its sector, with nearly 40 local, state and federal awards for efficiency, innovation and corporate social responsibility. The company is actively developing its domestic oil and gas reserves in North Dakota, Colorado and New Mexico.
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.
Additionally, the SEC requires oil and gas companies, in filings made with the SEC, to disclose proved reserves, which are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible – from a given date forward, from known reservoirs, under existing economic conditions, operating methods, and governmental regulations. The SEC permits the optional disclosure of probable and possible reserves. From time to time, we elect to use “probable” reserves and “possible” reserves, excluding their valuation. The SEC defines “probable” reserves as “those additional reserves that are less certain to be recovered than proved reserves but which, together with proved reserves, are as likely as not to be recovered.” The SEC defines“possible” reserves as “those additional reserves that are less certain to be recovered than probable reserves.” The Company has applied these definitions in estimating probable and possible reserves. Statements of reserves are only estimates and may not correspond to the ultimate quantities of oil and gas recovered. Any reserve estimates provided in this presentation that are not specifically designated as being estimates of proved reserves may include estimated reserves not necessarily calculated in accordance with, or contemplated by, the SEC’s reserves reporting guidelines. Investors are urged to consider closely the disclosure in our SEC filings that may be accessed through the SEC’s website at www.sec.gov.
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
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