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Wpx Energy Reports 3Q Results

The following excerpt is from the company's SEC filing.

Closing of Permian Acquisition Drives Record Oil Production

Higher-Intensity Completions on Permian and Williston Wells Highlight Upside

Cash Operating Expenses Down 21% vs. 3Q 2014

3Q Financials Impacted by Commodity Prices and Acquisition Costs, but Adjusted EBITDAX Up 21%

Capex Tracking with Cash Flow

TULSA, Okla. WPX Energys (NYSE:WPX) third-quarter 2015 results reflect the successful close of the companys acquisition of Permian Basin properties in mid-August and continued operational improvements in its portfolio.

WPX set a new high for liquids production includi ng a partial quarter of Permian volumes, averaging 56,500 barrels per day of oil and NGL in third-quarter 2015. Oil production alone surpassed 35,000 barrels per day for the first time and accounted for 21 percent of total equivalent production, up from 15 percent a year ago.

Enhanced completion designs on wells in the Permian and Williston basins are also yielding early-time results that exceed existing type curves, pointing to opportunities for increased shareholder value. WPX will continue to aggressively test and evaluate larger stimulations.

WPX reduced cash operating expenses by 21 percent in the third-quarter and continued to make progress on deleveraging with the signing of a $185 million agreement to sell a North Dakota gathering system and closing an $80 million divestiture of Wyoming interests. WPX expects to close the sale of the North Dakota gathering system this month.

WPX is now more than half of the way toward its goal of $400-$500 million in divestitures by the end of the year. The company also has processes under way to market a San Juan Basin gathering system and to evaluate opportunities for accelerating value in the Piceance Basin.

We continue to rapidly execute on our plans to reduce debt, drive down costs and bring more balance to our commodity mix, said Rick Muncrief, president and chief executive officer.

The third-quarter of 2015 will always be marked by our entry into the Permian Basin. We announced, capitalized and closed a transformational acquisition in just over 30 days. Thats an incredible achievement that shows our ability to act quickly and facilitate material change.

WPX is financially strong, has decades of drilling inventory, is making dramatic operational improvements and will continue to benefit from our attractive hedges, Muncrief added.

WPX reported an unaudited net loss attributable to common shareholders of $234 million for third-quarter 2015, or a loss of $0.93 per share on a diluted basis, compared with net income of $62 million, or income of $0.30 per share, in the same period a year ago.

Significantly lower commodity prices this year vs. those realized in 2014 decreased total product revenues by $159 million in third-quarter 2015. In addition to the impact of lower prices, third-quarter 2015 reported results reflect $104 million in acquisition related costs including a loss on the extinguishment of acquired debt and acquisition bridge facility fees, $47 million in exploration expense to write off leasehold and well costs in an exploratory area, and $41 million in higher DD&A expense. Also impacting third-quarter 2015 is a $124 million net loss from discontinued operations primarily related to certain contractual obligation charges recorded upon exiting the Powder River Basin.

Net loss from continuing operations attributable to WPX Energy was $110 million in third-quarter 2015, or a loss of $0.44 per share on a diluted basis, compared with net income of $46 million, or income of $0.23 per share, in the same period a year ago.

Excluding unrealized mark-to-market gains (losses), gains and losses on asset sales, impairments, contract termination and early rig release expenses, severance and relocation costs, and acquisition related costs, WPX had an adjusted loss from continuing operations of $42 million, or a loss of $0.17 per share on a diluted basis, for third-quarter 2015. A year ago, WPX had an adjusted loss from continuing operations of $15 million, or a loss of $0.07 per share, in the same period. Total product revenues decreased 35 percent in the 2015 period vs. the 2014 period. A reconciliation accompanies this press release.

Despite the decline in commodity prices that drove reported results, WPXs adjusted EBITDAX (a non-GAAP measure) for third-quarter 2015 was $240 million compared with $199 million for the same period in 2014. Favorable hedge positions, reduced operating expenses and the benefit of integrating Permian Basin operations contributed to the increase. Further detail regarding adjusted EBITDAX is available in this press release.

UPDATED HEDGING ACTIVITY

For the balance of 2015, approximately three-fourths of WPXs anticipated oil and natural gas production is hedged at $85.63 per barrel and $4.06 per MMbtu.

For 2016, roughly two-thirds of WPXs anticipated oil and natural gas production is hedged at $61.70 per barrel and $3.63 per MMbtu.

For the balance of 2015, WPXs average basis hedge price is ($0.13) per MMbtu. For 2016, WPXs average basis hedge price is ($0.19) per MMbtu.

Additional details about WPXs 2015 and 2016 hedge positions are available online at

www.wpxenergy.com

in the companys third-quarter slide presentation.

WPX CLOSES PERMIAN ACQUISITION

WPX completed its acquisition of privately held RKI Exploration & Production LLC in mid-August 2015, which is consistent with the companys strategy to maximize returns on capital, increase cash margins and grow oil production.

With the merger complete, WPX now has a substantial presence in the core of the Permians Delaware Basin that includes approximately 92,000 net acres, more than 3,600 gross risked drilling locations across stacked pay intervals and more than 375 miles of scalable gas gathering and water infrastructure.

The newly acquired Permian assets have existing production from 10 of 12 prospective benches in a 9,000 foot hydrocarbon-charged stratigraphic column that includes the Wolfcamp, Bone Spring, Avalon and Delaware Sands intervals.

PRODUCTION

WPXs overall third-quarter 2015 production was 167.3 Mboe/d, or 1,004 MMcfe/d, compared with 167.2 Mboe/d, or 1,003 MMcfe/d, in third-quarter 2014.

Liquids production accounted for 34 percent of WPXs third-quarter 2015 production, up from 32 percent in the sequential quarter and 26 percent a year ago.

Third-quarter 2015 volumes include a partial quarter of Permian production volumes following WPXs acquisition of RKI in mid-August. The 2014 period includes certain Marcellus volumes that have since been divested.

Average Daily Production

2Q Sequential

Change

Natural gas (MMcf/d)

Permian Basin*

Appalachian Basin

Subtotal (MMcf/d)

Oil (Mbbl/d)

Williston Basin

Subtotal (Mbbl/d)

NGLs (Mbbl/d)

Total Production (MMcfe/d)

Total Production (Mboe/d)

Denotes partial quarter results. WPXs acquisition of Permian Basin properties closed in mid-August.

WPX continues to post double-digit oil production growth, up 36 percent from 25,800 barrels per day a year ago to 35,200 barrels per day in third-quarter 2015. Sequential quarter performance was impacted by reduced completion activity this year.

Total liquids production during third-quarter 2015 averaged 56,500 barrels per day, which is a new high at WPX. Oil alone accounted for 21 percent of total production, up 6 percent vs. a year ago.

Third-quarter 2015 natural gas production was 665 MMcf/d compared with 746 MMcf/d a year ago which included certain volumes that have since been divested. Development activity in the Piceance during 2015 is significantly lower than in 2014 when WPX averaged nine rigs in the basin.

NGL volumes were 21,300 barrels per day in third-quarter 2015, up 8 percent vs. the most recent quarter and 25 percent higher than the same period a year ago. The ethane recovery rate was approximately 23 percent in third-quarter 2015 vs. 27 percent in second-quarter 2015. The decline is attributed to lower recoveries at the Meeker plant in Colorado during July.

GUIDANCE UPDATE

WPX is raising its full-year 2015 production guidance to a range of 165-172 Mboe/d, up from its previous estimate of 163-168 Mboe/d. WPX has raised production guidance and lowered cash operating expenses in each quarter of 2015.

Additional details about WPXs full-year 2015 guidance are available online at www.wpxenergy.com in the companys third-quarter slide presentation. Projected capital spending is unchanged.

DEVELOPMENT ACTIVITY SUMMARY

WPXs capital expenditure activity for the first nine months of 2015 was $640 million, including $205 million in the third quarter.

WPX has eight rigs deployed in its operating areas, comprised of four in the Permian Basin, two in the Williston Basin, one in the San Juan Basin and one in the Piceance Basin. The company curtailed previous plans to add additional rigs this year based on current commodity prices.

During third-quarter 2015, WPX participated in the completion of 69 gross (38 net) wells, including...


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