WPX Energy (WPX) to Produce More Oil; Ups 2016 Guidance

Oil and gas operator WPX Energy Inc. WPX announced an increase in its oil production guidance for 2016 by nearly 5% from its earlier projection. The company now expects oil production to be in the range of 39,000–41,000 barrels of oil per day, up from the earlier expectation of 37,000–39,000 barrels per day. With oil prices moving up from the depressed level, this will surely benefit the company.

WPX Energy has gradually shifted its focus from natural gas to oil production. Oil contributes a major part of its total production. During first-quarter 2016, oil production volumes accounted for nearly 52% of the total output.  As a result of the uptick in oil production expectation, the total production guidance has also moved up by 3% to 77–82 thousand barrels of oil equivalent per day (Mboe/d) from 75–80 Mboe/d.

The upgraded guidance is primarily due to strong well performance and an expected increase in drilling and completion activity in the Delaware and Williston basins during the second half of 2016. WPX Energy has plans to complete 15 to 20 drilled but uncompleted wells in the Williston Basin at the beginning of August and add a third rig in the Delaware Basin in October.

WPX Energy is also planning an expansion of its owned and operated midstream infrastructure in the Delaware Basin with the addition of a crude oil gathering system. The infrastructure strengthening activities will provide support to WPX Energy's large contiguous acreage position in the Stateline area of the basin.

Despite the increase in the total production guidance and additional activities to strengthen its existing infrastructure, the total drilling and completion budget for 2016 is expected to be $400 million to $450 million, well within the original guidance range of $350 million to $450 million.  

The company has been selling off its non-core assets to focus more on its core operations. In May, WPX Energy entered into a buyout agreement of $239 million, which will free the company from its Piceance Basin transport obligation. This buyout will mark the complete exit of WPX Energy from the Piceance Basin, allowing the company to concentrate on its core assets situated in the Permian, Williston and San Juan basins (read more:WPX Energy Closes Piceance Basin Obligation through Buyout).

WPX Energy currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the oil and natural gas space are EXCO Resources Inc. XCO, World Point Terminals, LP WPT and Statoil ASA STO, all carrying a Zacks Rank #2 (Buy).

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