On Nov 26, 2015, we issued an updated research report on WPX Energy Inc. WPX. This independent oil and gas company has been hit by the persistent softness in commodity prices.
WPX Energy reported mixed results in the third quarter of 2015, with its loss in the quarter wider than the Zacks Consensus Estimate and total revenues surpassing the mark. Despite matching production levels, total revenues were down 28.1% year over year.
Despite the current commodity price weakness, WPX Energy is gradually building up a strong portfolio of assets which will continue to boost its performance. The company has also taken a strategy to maximize returns and margins by scaling down its historically gas-weighted portfolio to make room for more oil production.
The company expects to invest in the range of $825 million to $925 million in 2015 to further strengthen its existing asset base. The completion of the RKI Exploration & Production, LLC acquisition in mid August ensured the company access to the reserve rich Permian Basin. The asset addition has increased WPX Energy’s total proved liquids reserves by 33% to 268 million barrels.
In addition, the company continues to monetize its natural gas operations and utilize the proceeds to lower debts and concentrate more on oil operations. Recently, in two separate transactions, the company sold assets worth $265 million. These divestures are part of WPX Energy’s target to divest assets worth $400 million to $500 million before the end of this year and another $400 million to $500 million in 2016.
In the wake of cheap oil, WPX Energy’s management has decided to rationalize its portfolio, improve its existing cost structure and focus more on core areas. These initiatives will help the company to improve margins. As a result, cash operating expenses per boe are expected to be $9.00 to $10.50, down from the previous guidance of $9.50 to $11.00 per boe.
WPX Energy currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the oil and gas E&P space are Cobalt International Energy, Inc. CIE, Apache Corp. APA and Chesapeake Energy Corporation CHK. All three presently hold a Zacks Rank #2 (Buy).
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