WPX Energy Prices Notes, Proceeds To Fund Felix Energy Buyout
Zacks Investment Research | Jan 08, 2020 05:51AM ET
WPX Energy (NYSE:WPX) announced that it has priced its previously declared offering of 4.5% senior unsecured notes due 2030. The total principal amount of the offering will be $900 million. This offering will close on Jan 10, 2020.
Net proceeds from the offering will be nearly $888.75 million, after deducting underwriting discounts and commissions, and before estimated offering expenses payable by WPX Energy. The net proceeds will be initially kept in an escrow account, and then be utilized to fund the acquisition of Felix Energy Holdings II, LLC, and pay related fees and expenses.
In December 2019, the company announced its intention to acquire Felix Energy for $2.5 billion to expand operations in the Delaware basin. Felix Energy has 58,500 net acres in an over-pressured, oily portion of the basin with six productive benches. This acquisition in a way will support the company’s goal of producing more oil from organic and inorganic assets.
Low-Interest Environment Helps
The Federal Reserve lowered interest rates thrice during 2019 and this development actually helped companies belonging to capital-intensive industries to fund their acquisitions and long-term projects by borrowing funds from the market at a comparatively cheaper rate than before.
As of Sep 30, 2019, long-term debt of WPX Energy was $2.2 billion, lower than $2.5 billion recorded on Dec 31, 2018. Its existing debt bears an annual interest rate ranging from 5.25% to 8.25%. This clearly indicates that the new notes will allow the company to make savings in interest payments.
Companies like Black Hills Corporation (NYSE:BKH) and Noble Energy (NYSE:NBL) , among others, took advantage of the current low-interest environment to refinance their old high interest-bearing debts from the issuance of low-interest-bearing notes.
Debt Level Lower Than Industry
WPX Energy’s current debt-to-capital ratio stands at 32.16%, lower than its Zacks Investment Research
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