WPX Energy enters oil-rich Permian basin with $2.35 billion buy

Tue Jul 14, 2015 11:14am EDT
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By Shubhankar Chakravorty and Amrutha Gayathri

(Reuters) - Natural gas producer WPX Energy Inc (WPX.N: Quote) agreed to buy privately held RKI Exploration & Production LLC for $2.35 billion, snapping up oil-rich assets in the Permian basin on the cheap amid a steep drop in crude prices.

The acquisition will give WPX about 92,000 acres in Permian's Delaware Basin - spread across Texas and New Mexico - at about $12,500 per undeveloped acre.

Acreage in the basin - the biggest and fastest-growing U.S. shale oil field - was worth as much as $30,000-$35,000 per acre at $100 oil, said Imperial Capital analyst Bob Christensen.

WPX shares rose as much as 7 percent to $11.88 in morning trading on the New York Stock Exchange on Tuesday.

"The Delaware basin is a premier basin for operators and for WPX to enter in this manner (with billions of dollars looking for deals) is a huge win," Simmons & Co analysts said.

A near-50 percent drop in crude prices since highs of over $100 per barrel in June last year has led to several big-ticket acquisitions, including Royal Dutch Shell's (RDSa.L: Quote) $70 billion offer for BG Group BG.L.

WPX's Permian deal is the largest shale acquisition since Noble Energy Inc (NBL.N: Quote) announced its $2 billion deal for Rosetta Resources Inc (ROSE.O: Quote) in May.

WPX, which was spun off from Williams Companies Inc (WMB.N: Quote) in 2011, said it planned to increase the number of rigs in the Permian to six at the end of the year from four.   Continued...

A WPX Energy natural gas drilling rig in Parachute, Colorado, December 10, 2014.  REUTERS/Jim Urquhart