WPX Energy buys Permian producer for $2.3 billion
The merger with Permian Basin-based RKI - which has a majority of leaseholds in Loving County, Tex., and Eddy County, N.M. - necessitates WPX taking on $400 million in debt as part of the purchase agreement.
Rick Muncrief, WPX president and chief executive officer, said in a July 14 press release that the merger was an opportunity to increase WPX's oil assets.
"This is a transformative opportunity that fits perfectly with our strategy to increase our oil production and high-quality oil inventory," Muncrief said. "RKI's asset scale and concentrated acreage position allows for efficient, low-cost, multi-decade development in a world-class oil play."
The acquisition increases WPX's oil drilling inventory to 4,600 locations in the Permian, Williston and San Juan basins.
The Permian Basin is one of the most active oil plays in the U.S. and is known for its numerous stacked reservoirs and successful drilling rates, according to the release.
The deal comes with infrastructure, including 192 miles of gas gathering pipelines, a 174-mile produced water system and 16 miles of fresh water transfer pipelines.
RKI has operations in the Powder River Basin in northeast Wyoming, although those assets are not part of the deal struck last month. RKI will sell them before the merger with WPX is completed.
Wally Drangmeister, New Mexico Oil & Gas Association spokesman, has said that despite low oil and gas prices, "the San Juan and Permian basins will continue to be a tremendous asset for the companies involved and a benefit to counties and the state."
WPX Energy is an active member of NMOGA, Drangmeister said.
"Certainly, by definition, anytime somebody acquires new leases or drills new wells that's a bullish statement of confidence of what they are doing," Drangmeister said. "Anybody who leases land for development expands their opportunities. That's by its very nature an expression of their belief that they can make it into a profitable operation."
The RKI merger comes on the heels of WPX's purchase in June of 14,300 net acres in the San Juan Basin's Gallup oil window from an undisclosed seller for $26 million.
Mucrief said his company's purchase was based on efficiencies illustrated by two Gallup wells drilled in eight days each.
"We're very pleased with the productivity of our Gallup wells and our ongoing improvements in drilling times and cost reductions," Muncrief said in a statement.
"The acquisition reflects our confidence in our ability to achieve $4 million well costs and estimated ultimate recoveries of 450,000 barrels of oil equivalent per well."