WPX Energy Well Poised On Price Increase & Strong Production
Zacks Investment Research | May 25, 2017 10:10PM ET
WPX Energy Inc. (NYSE:WPX) benefited owing to strong production from its oil assets and substantial recovery in commodity prices. The company continues to work on its strategy of increasing oil production, which is evident from the rising liquid mix. However, the competitive energy space, capital intensive operations and stringent regulations that are likely to increase the cost of drillings remain woes.
WPX Energy's first-quarter results were better than expected due to strong production from its oil assets. In additions, two acquisitions that were closed during the first quarter will help the company to further enhance its oil production in the near term.
Total production in the first quarter was 90,000 barrels per oil equivalent (boe) per day, up 12% year over year. Total liquids accounted for 64% of total production, reflecting the company’s increasing focus on oil. Realized oil prices in the quarter were $45.31 per barrel, up 76.8% from the year-ago quarter.
WPX Energy expects its 2017 oil production to increase 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.
WPX Energy’s management has decided to rationalize its portfolio, improve its existing cost structure and focus more on core areas. The company plans to lower costs through reduced drilling times, efficient use of pad design and completion activities, and negotiating lower costs for vendor goods and services. These initiatives will help the company boost its margins.
Oil and gas operations are capital intensive. A company needs to have a stable cash flow generation capability and secure external funding to sustain exploration activity. WPX Energy’s business could be negatively impacted by adverse economic conditions and disruptions in the global financial markets. This might limit the company’s accessibility to the capital markets. Rising interest rates will increase the capital cost of its future projects.
WPX Energy uses the hydraulic fracturing method to produce commercial quantities of natural gas and oil from many of its existing reservoirs. There has been heightened debate about the usage of hydraulic fracturing and its impact on the environment. If legislations or regulations pertaining to the restricted use of hydraulic fracturing are implemented, it could result in increased costs and lower margins.
Price Movement
In the last one year, WPX Energy has outperformed the Zacks categorized Zacks Investment Research
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