JPT The Company That Slipped Into the Permian “Under The Cover of Darkness” | SPE.org

WPX Energy’s decision to reconfigure its portfolio and buy into the Permian during the downturn was a bold one not viewed favorably by its shareholders at the time. Now, with its operator peers bidding almost $100,000/acre for nearby land, the company can confidently say it was a pacesetter.

“We had the sheer opportunity under the cover of darkness during distress in the industry,” and the company pounced, said Clay Gaspar, WPX Energy president and chief operating officer, during a presentation last week at the SPE Liquids-Rich Basins Conference in Midland, Texas.

Awash in the tidal wave of Permian mergers and acquisitions over the past few years, WPX’s $2.35-billion purchase of privately held RKI Exploration & Production in 2015 feels like ancient history. But to Gaspar and his fellow management who joined the company just before the freefall in commodity prices, it’s an inflection point.

WPX had been “distressed at $100 oil,” Gaspar explained. “We would have been out of business if we didn’t make some incredibly aggressive changes at $26 oil,” a reality that shareholders—not known for their patience when it comes to long-term portfolio overhauls—couldn’t comprehend.

Prior to the deal, when the company’s top five shareholders caught wind of management’s interest in the basin, they warned, “Look, if you buy into the Permian Basin, we will not just sell some of our shares—we will sell every share we own,” Gaspar said. After the acquisition was announced, WPX share prices plunged.

“We made the most out of it,” he said. “We not only survived the down cycle, we rebuilt the organization. We made some incredibly important acquisitions, divestitures, and very strategic moves around the restructuring.”

Formerly a gas-focused company, WPX is now built on Permian and Williston oil. It has 100,000 net acres in the core of the Delaware Basin, where it produces from 10 of 13 benches. Companywide oil production this year is expected to be 78,000–82,000 B/D. Next year it will rise above 100,000 B/D, Gaspar said.

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