WPX Energy announced on December 16th an agreement to acquired Delaware Basin operator Felix Energy. Felix has approximately 1,500 gross undeveloped locations (at predominately 2-mile lateral lengths) in the eastern portion of the basin with expected production of approximately 60 MBoe/d (70% oil) at the time of anticipated closing. 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.
Felix was founded in 2013 with a $400 million equity commitment from EnCap Investments which later expanded to $500 million. Felix I was sold to Devon Energy in 2016 for $1.9 billion, and its ownership interest in Tall Oak Midstream was sold to EnLink Midstream. Felix II was formed in 2017 with $500 million from EnCap.
WPX plans to implement a dividend post-closing, targeting approximately $0.10 per share on an annualized basis at initiation. 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 parties anticipate closing the transaction early in 2Q 2020. WPX’s board unanimously approved the transaction. Barclays and Tudor Pickering Holt acted as financial advisors to WPX while Jefferies acted as financial advisor to Felix on the deal.