Fitch gives WPX Energy notes BB, on watch

Fitch Ratings said it assigned a BB/RR4 rating on WPX Energy Inc.’s new senior unsecured notes and placed the notes on rating watch positive. The proceeds from the new notes, up to $900 million due in 2028 and 2030, will be used to fund a portion of the cash consideration for the acquisition of Felix Energy Holdings II, LLC, and to repay any Felix debt.

The rating watch positive considers WPX’s announcement it was acquiring Delaware Basin assets in a deal valued at about $2.5 billion to be funded with new senior unsecured notes, equity to the seller and cash from the balance sheet. The transaction, which adds about 58,500 net acres, daily production of 53 mboe/d and 578 mmboe of proved reserves, at YE 2018, largely in Winkler and Ward counties. WPX will have about 184,000 Permian acres, total production of 226.4 mboe/d and almost 5,000 Delaware drilling locations. The assets are immediately accretive to WPX’s FCF profile.

Fitch sees resolving the positive watch and upgrading WPX’s long-term issuer default rating and all unsecured debt issuances upon closing of the transaction, which is expected to occur in 2Q 2020 after a shareholder vote. Fitch believes WPX’s pro-forma financial and operational profile is in line with the agency’s investment grade thresholds.

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