WPX Energy In A JV To Develop Midstream Assets In Permian

WPX Energy (NYSE:WPX) announced that it has entered into a joint venture (JV) agreement with Howard Energy Partners to develop its oil gathering and natural gas processing infrastructure in the Stateline area of the Permian’s Delaware Basin.

The joint venture is expected to support nearly 37% of WPX Energy’s 135,000 acre holdings in the Delaware Basin. It will include WPX Energy’s crude oil gathering assets already under construction and a planned natural gas processing complex.

Joint development of assets helps the owner of the property to share the burden of development of its high quality reserves. The cash received helps to strengthen the balance sheet and develop other high margin properties.

More Details of the JV

This will be a 50/50 joint venture between the parties. Howard Energy Partners will pay WPX Energy $300 million for its right in 50,000 acres of the latter’s holdings in Delaware. Howard Energy Partners will also fund the first $263 million of the JV capital expenditures, including a $132 million expense for WPX Energy.

This joint venture will complete the buildout of a new crude oil gathering system, already started by WPX Energy in the basin. In addition, it will start constructing a new cryogenic natural gas processing complex with a planned initial capacity of 400 million cubic feet of gas per day (MMcf/d.)

However, the JV will not include WPX Energy’s natural gas and water gathering systems in the area, along with midstream rights to its remaining 63% acreage position in the Delaware.

Oil Focus of WPX Energy

WPX Energy’s focus on oil has started to yield results. In the Delaware Basin, it has more than 6,420 gross drillable locations, with commodity mix being 54% oil, 30% natural gas and 16% NGLs. The company plans to invest $480–$510 million in Delaware this year.

The JV with Howard Energy Partners will further augment the development of this resource-rich holding of the company.

WPX Energy aims to increase its 2017 oil production by 30% from 2016 levels. The company anticipates total production in 2017 of 103–113 thousand barrels of oil equivalents per day (MBoe/d), including 52–56 thousand barrels per day (Mbbl/d) of oil.

Price Movement

Shares of WPX Energy have gained 5.9% compared with the Zacks categorized Oil & Gas –Exploration & Production – U.S. industry’s loss of 16.2% in the last twelve months.

Zacks Rank & Stocks to Consider

WPX Energy currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are W&T Offshore Inc. (NYSE:WTI) , Bonanza Creek Energy, Inc. (NYSE:BCEI) and Legacy Reserves LP (NASDAQ:LGCY) . All of them hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

W&T Offshore reported a positive earnings surprise of 100.0% in the last quarter. Its 2017 earnings estimates moved to 44 cents from a loss of $46.63 in the last 60 days.

Bonanza Creek Energy reported a positive earnings surprise of 77.78% in the last quarter. Its 2017 earnings estimates moved up 29.5% in the last 60 days to 79 cents.

Legacy Reserves LP reported a positive earnings surprise of 161.54% in the last quarter. Its 2017 loss estimates narrowed to 25 cents from 81 cents in the last 60 days.

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