WPX Energy Inc. (WPX - Free Report) announced that it has priced its public offering of $600 million of its 5.250% Senior Notes due 2027. The issue was upsized by $100 million from the initial announcement.
The company intends to utilize the net proceeds of $592.5 million from the offering to redeem its outstanding 6.000% Senior Notes due 2022 and 8.250% Senior Notes due 2023. The surplus proceeds, if any, will be utilized for general corporate purposes, which may include the repayment or redemption of outstanding indebtedness.
Lower-Than-Industry Debt Level
WPX Energy’s debt-to-capitalization ratio currently stands at 32.11%, lower than its industry’s average of 33.01%. The company, which is committed to lower debt level, has reduced net debt by $330 million year to date.
Proper management of long-term debt led to a 4.7% year-over-year decline in interest expenses in first-half 2019. The issue of low-interest-bearing notes will further lower WPX Energy’s cost of capital over the long term.
WPX Energy has transformed itself over the past few years and its focus has changed from natural gas to oil. Ongoing investments in WPX Energy’s core assets in Permian and Williston basins will help it enhance production and build reserves. The company, which has plans to invest $1,100-$1,275 million in 2019, expects oil production to improve 20% year over year during the year.
WPX Energy’s management has decided to rationalize its portfolio by concentrating on core assets, and might monetize midstream investments and give more attention toward the resource-rich Permian Basin.
Focus on Permian Basin
Per the latest release of the U.S. Energy Information Administration (“EIA”), U.S. crude oil production will average 12.2 million barrels per day (b/d) in 2019, up 1.2 million from the 2018 level. The same is expected to rise 1.0 million b/d in 2020 to an annual average of 13.2 million b/d. We expect a major portion of the overall increase in oil production to come from the Permian Basin.
Given the existing reserves of Permian Basin, major oil and gas producing companies of the United States are concentrating to expand operations in the region. Occidental Petroleum (OXY - Free Report) edged out Chevron Corporation (CVX - Free Report) to acquire Anadarko Petroleum for further expanding its presence in the region.
WPX Energy already has a very attractive portfolio in the Permian Basin region, which is assisting it to fulfill the oil-focused expansion goal.
WPX Energy’s shares have outperformed its industry in the past three months.
Zacks Rank & A Key Pick
WPX Energy currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A better-ranked stock from the same sector is Matrix Service Company (MTRX - Free Report) , which sports a Zacks Rank #1. The company reported average positive earnings surprise of 8.33% in the last four quarters. The Zacks Consensus Estimate for the current year has moved up 6.67% in the past 60 days.
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