WPX sells its San Juan Basin pipeline system
LYBROOK – Citing a push to reduce a net debt of $3.2 billion, WPX Energy has sold its entire oil and gas infrastructure in the San Juan Basin to a New York-based global investment manager.
On Dec. 31, WPX — based in Tulsa, Okla., with local offices in Aztec — sold its 220-mile San Juan Basin gathering system. Gathering systems are typically oil, gas and water pipeline networks that transport those products from a well site to a main storage facility, processing plant or a shipping area.
According to a press release from the company, the sale to I Squared Capital was listed at $309 million.
As part of the deal, WPX will receive $285 million in cash and a "commitment estimated at $24 million in capital designated" to expand the system as WPX continues its commitment to the basin after its 2013 discovery of the Gallup oil play here, according to the release.
The sale is part of the company's plans following the $2.3 billion purchase of Permian Basin-based RKI in August. That acquisition increased WPX's oil drilling inventory to 4,600 locations in the Permian, Williston and San Juan basins. That purchase agreement required WPX to take on $400 million in debt.
Currently, WPX has net debt of $3.2 billion, which consists of $3 billion in notes and the remainder primarily in revolver borrowings, the release states.
Rick Muncrief, WPX president and CEO, said in a statement that, along with the sale of the company's $185 million gathering system in Williston, N.D., in November, the company is actively focused on debt reduction.
“I’m pleased with the success of our asset sales,” Muncrief said. “We exceeded our 2015 target and will continue to prioritize debt reduction in 2016.”
Adil Rahmathulla, I Squared Capital partner, said the purchase represents an investment in the San Juan Basin and a working collaboration with WPX.
“We are excited about the opportunity to invest in the San Juan Basin and look forward to collaborating with WPX in the build-out of the gathering system,” Rahmathulla said.
Under the terms of the agreement, WPX will continue to operate the gathering system for at least two years with the opportunity to continue in the future. The parties expect to close in the first quarter of this year.
Oil and gas companies are feeling prolonged pain from the decline of crude oil prices on the commodities market since fall 2013, and work for operators and service companies locally is down.
Currently, only one drilling rig, operated by Aztec Drilling, is active on the New Mexico side of the basin. That operation is run by WPX.
Andrew Brunk, WPX's San Juan Basin operations drilling superintendent, said roughly 24 to 25 workers have been busy at a new pair of test wells the company has been drilling on snow-packed Bureau of Land Management land near Lybrook since December.
"We're trying to keep (operations) going," Brunk said. "We hope to not be the only ones drilling. We just want to keep moving."
James Fenton is the business editor of The Daily Times. He can be reached at 505-564-4621.