Exit: EnCap selling Felix II to WPX for $2.5bn; impact to Felix Midstream, Felix Water, Fortis Minerals?


[Context: On December 16, WPX Energy (NSYE: WPX) announced a $2.5bn cash and stock deal to acquire EnCap-backed Felix Energy II, which had 60,000 boepd of Delaware Basin production. Felix Energy I was a STACK focused effort that sold to Devon Energy for $1.9bn in December 2015 along with Tall Oak Midstream for another $1.55bn. Neither the press release or investor presentation (see below) mentioned Felix Midstream or Felix Water, its midstream subsidiaries. Nor were minerals mentioned… but Felix II’s CEO Skye Callantine is also chairman of EnCap-backed Fortis Minerals. Further details, advisors and related links are below.]


WPX Energy Accelerates 5-Year Vision with Opportunistic Transaction

  • Initiating Dividend in Conjunction With Accretive Felix Acquisition
  • Transaction is accretive on all important metrics: EPS, CFPS, FCF per share, ROCE and NAV
  • Felix production stream of 70% oil enhances WPX’s margins and oily inventory
  • De-risked acquisition creates greater cashflow certainty for dividend and share buybacks
  • Purchase price 3.5 times 2020 EBITDAX @ $50 WTI
  • Leverage-neutral, scale-enhancing transaction
  • Significant operational synergies expected, but not included in transaction metrics

TULSA, Okla.–December 16, 2019–(BUSINESS WIRE)–WPX Energy (NYSE:WPX) is taking another significant step in its commitment to delivering shareholder value with the $2.5 billion purchase of Felix Energy, one of the highest quality Delaware Basin operators.


Felix has approximately 1,500 gross undeveloped locations in the eastern portion of the basin, with expected production of approximately 60 MBoe/d (70% oil) at the time of anticipated closing.

WPX plans to implement a dividend post-closing, targeting approximately $0.10 per share on an annualized basis at initiation.

The acquisition and dividend program follow other steps WPX took in 2019 to enhance its value proposition, including reducing net debt, executing attractive midstream monetizations, launching a share buyback program and generating free cash flow.

The purchase price consists of $900 million cash, subject to closing adjustments, and $1.6 billion in WPX stock issued to the seller. WPX plans to fund the cash portion through issuance of $900 million of senior notes on an opportunistic basis. WPX also has obtained committed financing from Barclays in connection with the transaction and has full access to a $1.5 billion revolving credit facility.

The stock consideration comprises approximately 153 million WPX shares, which is based on the 10-day volume-weighted average price as of Dec. 13, 2019. The transaction is subject to customary closing conditions and approval by WPX shareholders.

The parties anticipate closing the transaction early in the second quarter of 2020. WPX’s board unanimously approved the transaction.


The acquisition is consistent with all of the tenets in WPX’s five-year vision for shareholders that the company introduced in November during its third-quarter report.

“Meeting the five-year targets we communicated is the absolute standard and benchmark for any investment we make,” said WPX Chairman and Chief Executive Officer Rick Muncrief.

“Now we can accomplish these objectives for shareholders more quickly and efficiently with the irrefutable benefits of the Felix transaction.

“Delivering on our plan ahead of schedule in a highly de-risked, leverage-neutral manner is consistent with our opportunistic approach,” Muncrief added.

On a pro forma basis, WPX expects to generate significant free cash flow in 2020 at $50 oil. Following the acquisition, cash flow per share, earnings per share, free cash flow per share, return on capital employed, and cash margins are all expected to increase.

WPX also expects to continue its opportunistic share buybacks, to implement the previously mentioned dividend program, and to reduce its leverage to 1.0x by year-end 2021.

WPX based all of its transaction economics on $50 oil, with no assumptions for improvements in development costs or operating efficiencies. However, WPX believes significant upside exists by capturing synergies associated with scale.


WPX stands to gain approximately 1,500 gross drillable locations (at predominately 2-mile lateral lengths) that compete with the returns from its existing position in the core Stateline area of the Delaware Basin.

Felix has 58,500 net acres in an over-pressured, oily portion of the basin with six productive benches. Approximately 25 additional wells are required to hold nearly all Wolfcamp and Third Bone Springs rights, with approximately half of those wells expected to be drilled in 2020.

Felix’s recent multi-well pads with at least 12 months of cumulative gross production are averaging approximately 240,000 barrels of oil per well, with pad averages ranging from 213,000 to 260,000 barrels of oil per well. Felix’s average lateral length is 9,200 feet per well. Details are provided in an investor presentation at www.wpxenergy.com


Pending the transaction’s close, WPX expects to add two members to its board from EnCap Investments L.P. – the private equity company that founded Felix Energy. EnCap has a history of creating value in the energy sector.

Doug Swanson, Managing Partner of EnCap, stated, “This is an exciting day for both Felix Energy and EnCap. Over the past four years, the Felix team has worked tirelessly to build what we consider to be a world-class Delaware Basin asset. Given the current market environment, we are strong believers in consolidation and feel that the Felix asset base is a clear strategic fit for WPX.”

Marty Phillips, Managing Partner and Founder of EnCap, added, “EnCap is pleased to be partnering with WPX, which we believe is one of the premier public companies led by a seasoned and proven management team. We trust in WPX’s vision, operational expertise and strong leadership, and we look forward to a long and successful partnership.”


Barclays and Tudor, Pickering, Holt & Co. acted as financial advisors to WPX on the transaction. Weil, Gotshal & Manges LLP served as legal advisor to WPX.

Jefferies LLC acted as financial advisor to Felix on the transaction. Vinson & Elkins LLP served as legal advisor to Felix.

About WPX Energy, Inc.

WPX is an independent energy producer with core positions in the Permian and Williston basins. The company built its Permian Basin position through acquisitions of RKI Exploration & Production and Panther Energy, as well as grassroots leasing and the formation of a midstream joint venture with Howard Energy Partners.

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