In a Sept. 13 research note, Raymond James analyst John Freeman reported the key takeaway from a "few days on the road" with the management team of WPX Energy Inc. (WPX:NYSE), a Top Pick, is "midstream monetizations are likely to happen sooner than we anticipated."
Freeman relayed the assets that comprise the company's estimated $1.8 billion portfolio, the order in which WPX would likely sell them and their estimated value.
First, WPX could divest its 20% interest in Whitewater Midstream, the company that owns the roughly 135-mile, 1.4 billion cubic feet per day capacity Agua Blanca natural gas pipeline. The sale of WPX's stake, which could happen this year, could generate $140–150 million ($140–150M), Raymond James estimates.
Next could be the sale of WPX's 25% interest in the 400-mile Oryx II, a 650 thousand barrel per day (650 Mbpd) crude oil pipeline system in the Delaware Basin, slated to be fully operational by year-end. Subsequently, the company could market it and possibly divest it by mid-2019. Raymond James values WPX's owned portion at $525M.
Another potential monetization is sale of WPX's 50% interest in Catalyst Midstream, a joint venture with Howard Energy. Catalyst comprises a 50-mile, 125 Mbpd crude gathering system and two natural gas processing plants. WPX's half is worth about $600M, according to Raymond James' calculations.
Finally, WPX's other assets "offer long-term optionality," Freeman noted. They include a wholly owned, 192-mile, 150,000 million cubic feet per day natural gas gathering system, and a 200 Mbpd saltwater disposal system in the Delaware's Stateline area, "each of which could be 'dropped down' to the company's Catalyst joint venture." The gathering system, which would likely be sold first, is valued by Raymond James at about $120M. The disposal system, to be built out before divestiture, could bring more than $400M.
WPX also could develop a triple-stream gathering system in central Reeves County, Texas, into an estimated $100M-plus asset.
As for the proceeds of any sales, Freeman indicated, WPX would most likely use them to fund expanded drilling in the Delaware Basin, adding two more rigs for a total of nine in operation.
The analyst reiterated Raymond James' Strong Buy rating and $30 per share price target on WPX, whose stock is currently trading at around $18.45 per share.[NLINSERT]
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Disclosures from Raymond James, WPX Energy Inc., Sept. 13, 2018
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