Moody’s reviews WPX Energy for upgrade

Moody’s Investors Service said it placed the ratings of WPX Energy, Inc. under review for upgrade following the announcement that it entered an agreement to acquire Felix Energy (unrated). The purchase price is $2.5 billion, consisting of $900 million in cash and $1.6 billion in stock issued to the seller. WPX will not assume any debt as part of the transaction. Moody’s also upgraded WPX’s speculative grade liquidity rating to SGL-1 from SGL-2.

“The ratings review for upgrade reflects Moody’s expectation that the Felix Energy acquisition will positively impact WPX’s asset profile, increase its scale, boost its profit margins and contribute to positive free cash flow in 2020,” the agency said in a press release.

The purchase will expand the company’s scale and position in the Delaware basin, increasing its production by 60 Mboe/d, or 33 percent, and inventory locations by about 1,500. On a pro forma basis, WPX will have 184,000 net acres and 240.5 Mboe/d of production in the Permian Basin.

“The funding of the $2.5 billion purchase price with almost two-thirds equity keeps the transaction largely leverage neutral and WPX will not assume any debt with the acquisition,” Moody’s said. The seller will own about 153 million WPX shares (27 percent of total outstanding shares) and hold two seats on the board of directors.

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