WPX Energy Inc. (NYSE: WPX) made waves in the market as 2015 was coming to a close on news of an asset sale. The company announced that it signed an agreement to sell its San Juan Basin gathering system for consideration of approximately $309 million to a portfolio company of ISQ Global Infrastructure Fund, a fund managed by I Squared Capital.
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 following years. This transaction is expected to close in the first quarter of 2016.
When the transaction closes, the gathering system will consist of over 220 miles of oil, gas and water gathering lines that WPX installed in conjunction with its drilling in the Gallup oil play, where it made a discovery in 2013.
Ultimately, WPX is receiving roughly $285 million cash and a commitment estimated at $24 million in capital designated by the purchaser to expand the system to support WPX’s development in the Gallup oil play.
This agreement increases the amount of WPX’s recent divestitures to nearly $575 million. The company originally targeted $400 million to $500 million in activity for the latter half of the year.
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Rick Muncrief, president and CEO of WPX, commented:
I’m pleased with the success of our asset sales. We exceeded our 2015 target and will continue to prioritize debt reduction in 2016.
Adil Rahmathulla, partner at I Squared Capital, added:
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.
Shares of WPX were trading up nearly 13% at $5.82 on Thursday, with a consensus analyst price target of $10.96 and a 52-week trading range of $5.03 to $14.65.
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