DRAFT: Wednesday, July 1
June, 2015
Transformational Delaware Transaction Rick Muncrief President & CEO, WPX Energy
Major Entry into the Core of the Delaware Basin Delaware Basin Map
WHY NOW? Accelerates portfolio transition Adds premier drilling inventory Delaware has emerged as a world-class stacked oil play Management team in place for successful execution Corporate evolution paved path to transaction New Mexico Texas
WHY RKI? High-quality resource, substantial production and upside Creates visibility into multi-decade growth Experienced and recognized operational team Includes substantial scalable infrastructure Provides ~30% returns at $60 WTI
RKI ACREAGE
A Transformational Transaction | July 2015
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Acquisition Overview Privately negotiated $2.75B acquisition of RKI ► ► ►
Expected to close by the end of 3Q’15 Funded with debt, equity, cash Target net debt/EBITDAX ratio of 2x by YE2017 Wolfcamp
Acquisition value1 ► ► ►
Bone Spring
~$1.1B existing production @ ~$50,000 per flowing barrel ~$500MM owned/operated infrastructure in place ~$1.15B ~92,000 net acres @ ~$12,500 per acre
Avalon
~92,000 net acres with 12 prospective zones2 ► ► ►
670,000+ net prospective acres of stacked pay 3,600+ gross risked locations ~98% of net acres held by production Infrastructure Hub
~22,000 Boe/d current production ► ►
53% oil, 16% NGL, 31% natural gas Currently operating 4 rigs, ramping to 6 by YE2015
New Mexico Texas
Scalable midstream infrastructure with excess capacity Delaware Sands
1
Based on general industry guidelines
2 See
RKI ACREAGE
table on slide 6 for reconciliation A Transformational Transaction | July 2015
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Past Execution Set the Path for Transformational Transaction Proven Execution over Past Year
Continued Execution
Positioned Organization for Success
60
MMbl/d
✓ □ Realigned organization ✓ □ Right-sized staffing level ✓ □ Established a winning culture ✓ □ Attracted top talent
40 20 0
Announced or Completed $1.5B of Transactions
WPX (2015) 1 20
Cash Margin Growth
16 14 12 10 WPX (2015) 1 5
Pro Forma (2017)
CFPS Growth 2
4 $/Share
Stronger Balance Sheet
✓ □ Renegotiated revolver ✓ □ Reduced costs across the board ✓ □ Executed strong hedges for 2015-16
Pro Forma (2017)
18 $/Boe
✓ □ Monetized Piceance working interest to an MLP ✓ □ Executed Trail Ridge drilling carry ✓ □ Added San Juan Gallup acreage ✓ □ Monetized transport/acreage in NE PA ✓ □ Monetized international assets (Apco) ✓ □ Monetized firm New York transport ✓ □ Marketing Powder River Basin ✓ □ Marketing remaining Marcellus acreage
Oil Growth
80
3 2 1 0 WPX (2015) 1
1 2
Pro Forma (2017)
Standalone WPX Estimated Full Year 2015 2015: CFFO $770MM, share count: 206MM 2017: CFFO $1.4B, share count 301MM A Transformational Transaction | July 2015
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Combination Creates Long-Term Shareholder Value VALUE PEOPLE ASSETS Capacity to Accelerate Drilling Activity Technology and Marketing Expertise
Management Team with Permian Experience
Proven Developer of Large-Scale Resources
Decades of Inventory in the Delaware Basin
Proven Permian Operator
Recognized and Experienced Team
Critical Infrastructure with Excess Capacity
A Transformational Transaction | July 2015
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Delaware Basin: Target-Rich Opportunity Formation
Net Prospective Acres
Average Working Interest
Gross Risked Locations
Assumed Spacing
Delaware Vertical Bell Canyon Delaware Vertical Cherry Canyon Delaware Vertical Brushy Canyon Delaware Horizontal Upper Avalon Lower Avalon 1st Bone Spring 2nd Bone Spring
65,000 65,000 51,000 14,000 56,000 56,000 56,000 56,000
90% 90% 90% 90% 56% 56% 56% 56%
170 750 100 330 220 530 530
40 40 40 160 160 160 160 160
3rd Bone Spring
56,000
56%
220
160
Wolfcamp A
49,000
74%
370
80
Wolfcamp B
49,000
74%
-
-
Wolfcamp C
49,000
74%
200
160
Wolfcamp D
49,000
74%
200
160
Total
670,000+
3,600+
Low-risk, high-margin inventory provides valuable upside ►
Decades of drillable locations
►
Significant upside potential from downspacing
►
Flexibility to prioritize drilling prospects
►
1.1+ billion barrels of equivalent net resource potential, less than 10% developed A Transformational Transaction | July 2015
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Operational Overview Clay Gaspar, Sr. VP Operations and Resource Development
Delaware Basin Operational Overview and Outlook Strong results today ► Wolfcamp: ►
2nd Bone Spring: ►
►
$7.0MM D&C, 670 Mboe EUR $5.5MM D&C, 550 Mboe EUR
Delaware Vertical: ►
$2.4MM D&C, 290 Mboe EUR
Rapid development plan ► Ramp rig fleet from 4 to 6 by YE2015 ► Targeting 11 rigs in 2017 ► Initial drilling will focus on the Wolfcamp, Bone Spring and Delaware ► $500MM+ capital program in 2016
Annual Production (Mboe/d)
►
Production Growth 60 50 40 30 20 10 0 2013A
2014A
2015E
2016E
2017E
Rig Count 12
Significant upside opportunities ► High intensity completions ► Additional benches ► Downspacing/longer laterals ► Netback improvements ► Multi-well pad development and facility design
Average Rig Count
10 8 6 4 2 0 YE2015
2016E
2017E
A Transformational Transaction | July 2015
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World-Class Hydrocarbon System BELL CANYON
CHERRY CANYON
Hydrocarbon Pay Indication Delaware Mountain Group ► ► ►
9,000’
BRUSHY CANYON
Avalon Shale ►
►
AVALON FIRST BONE SPRING SECOND BONE SPRING
►
Thick section of combined Upper and Lower Avalon with greater than 900’ of gross thickness in core of Stateline field Large hydrocarbon resource in place Both Upper and Lower Avalon have been de-risked by 50 producing wells on Stateline acreage
Bone Spring ► ► ►
THIRD BONE SPRING
3,000’+ of stacked conventional sands 200+ vertical Delaware wells across Stateline position de-risk the play Horizontal development remains as upside potential
►
Three benches present Over 1,300’ of total gross interval Sufficient resource thickness exists to support stacked development Production currently established from 1st and 2nd Bone Spring on the acreage position
Wolfcamp WOLFCAMP A WOLFCAMP B WOLFCAMP C WOLFCAMP D
► ► ► ►
Four benches present on Stateline acreage Total section in excess of 2,000’ thick Production currently established from A and C benches on Stateline Wolfcamp A de-risked by 29 horizontal wells
A Transformational Transaction | July 2015
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Strong Well Results Validate Core Position RKI Burton 4 IL Fed Com 1H (4,068’ lat.) IP(30): 1,293 Boe/d Bone Spring
RKI Helios 6 Federal Com 4H IP(30): 891 Boe/d 1st Bone Spring
RKI Pecos State 46-1H ([3,624’ lat.) IP(30): 1,269 Boe/d Avalon
RKI Longview Federal 31-1H IP(30): 1,496 Boe/d 1st Bone Spring
Devon Tomb Raider Fed 1H IP(30): ~1,500 Boe/d Bone Spring
RKI Lindsay 10-8H IP(30): 1,294 Boe/d Wolfcamp RKI Lindsay 10-1H (4,386’ lat.) IP(30): 1,035 Boe/d Lower Avalon
Lea
OXY Goodnight 27 Federal 5H (2,800’ lat.) IP(30): 935 Boe/d Bone Spring
RKI Jackson Unit 019H (4,320’ lat.) IP(30): 1,280 Boe/d 2nd Bone Spring
RKI CBR 44-2H (4,120’ lat.) IP(30): 1,188 Boe/d Wolfcamp A
EOG Brown Bear 36 State #701H IP(30): 2,915 Boe/d Wolfcamp
Eddy
RKI Bunin 4-2H (3,618’ lat.) IP(30): 1,176 Boe/d Wolfcamp A
Anadarko McKnight 54-1-29 (4,000’ lat.) IP(30): 1.020 bbl/d Avalon
BHP Extinction 57-T1 32 1H (4,695’ lat.) IP(30): 1,279 bbl/d Wolfcamp D
EOG Brown Bear 36 State #502H IP(30): 2,125 Boe/d 2nd Bone Spring
Cimarex Count Fleet 48 State 2H (4,476’ lat.) IP(30): 1,416 Boe/d Wolfcamp B
EOG State Magellan 2H (4,868’ lat.) IP(30): 1,027 Boe/d 2nd Bone Spring
Legend Anadarko Apache BHP Cimarex Concho Devon
EOG Mewbourne OXY RKI Shell Other Operators RKI Leasehold
New Mexico Texas
Loving
Culberson Energen Winchester 57-10 #1H (4,218’ lat.) IP(30): 2,186 Boe/d Wolfcamp B
Reeves
EOG Winkler Gemini 2H (4,870’ lat.) IP(30): 1,907 Boe/d 2nd Bone Spring EOG State Galileo 6H IP(30): 2,252 Boe/d Avalon
A Transformational Transaction | July 2015
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Infrastructure Capacity in Place for Rapid Development Produced water disposal system ► ►
174 miles of pipeline 200,000 barrels per day of water disposal capacity ► Current disposal: ~90,000 bpd
Fresh water transfer system ► ► ►
16 miles of pipeline Supports temporary system to D&C new wells Significantly reduces well costs
Gas gathering system ► ►
192 miles of pipeline 90 MMcf/d of gas compression capacity ► Current compression: ~40 MMcf/d
Full field accessibility to electrical power Opportunity to improve netbacks with future oil gathering build out Future Oil Gathering Pipeline Fresh Water Pipeline Gas Gathering Pipeline Produced Water Disposal RKI Leasehold
A Transformational Transaction | July 2015
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Financial Outlook Kevin Vann, Chief Financial Officer
Transaction Financing Components
Financing Notes ►
►
►
►
RKI existing debt will be refinanced Committed financing in place Equity issued to public will include mandatory convertible preferred securities Capital markets activity is being launched immediately
140MM
Transaction Financing Components Category
$MMs
Contractual Equity to RKI Owners1
470
RKI Debt – To Be Refinanced
400
WPX Cash on Hand
300
New Public Equity and Notes/Revolver Debt
1,580
Total Transaction Value2
$2,750
committed shares transaction costs
2Excludes
A Transformational Transaction | July 2015
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Targeting 2x Net Debt to EBITDAX by 2017 Several options to reduce leverage ►
►
Significant, attractive midstream infrastructure in place across core basins ► Williston Van Hook gathering system ► San Juan oil, gas and water assets ► Piceance water system Evaluate creative options to unlock Piceance Basin value
Rapid underlying cash flow growth Demonstrated track record of execution ► ►
►
$1.2B in divestitures since beginning of 2014 Utilized multiple transactional structures (JVs, asset sales, working interest sales) Proactive hedging and credit agreement management
A Transformational Transaction | July 2015
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WPX Pro Forma Outlook Through 2017 WPX PRO FORMA OUTLOOK ►
100%+ oil growth 2015-2017
20151
2016
2017
Commodity Price Assumption ►
►
►
Capital spending in line with EBITDAX in 2017
Oil
$55.00
$62.50
$70.00
Natural Gas
$3.00
$3.50
$3.75
Strong hedge program supports 2016 capital budget
Average Annual Rig Count Delaware
6
8
11
Williston
3
4
5
San Juan
2
2
2
1
1
1
12
15
19
$0.9 - $1.0
$1.3 - $1.5
$1.5 - $1.7
160 - 165
180 - 190
190 - 210
22%
30%
36%
$0.9 - $1.0
$1.1B - $1.2
$1.5 - $1.7
Oil becomes 36% of production mix in 2017
Piceance Total Rig
►
Additional guidance to be provided during Q2 earnings call
Count2
Capital Budget ($ in billions)
Production (Mboe/d) Equivalent Production % oil
EBITDAX ($ in billions) 1
2015 has a partial year impact for RKI, assumes September 1st closing 2 Operated rigs only. 2015 based on year-end rig count. 2016-2017 based on annual average
A Transformational Transaction | July 2015
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Premier Western Energy Producer PERMIAN BASIN Deep Inventory of High-Return Locations • Decades of drillable locations • Significant upside potential from downspacing and additional prospective horizons • 670,000+ net prospective acres
WILLISTON BASIN High Oil Content with Continuing Growth • 600+ operated remaining locations, ~85,000 acres • ~52% production CAGR 1Q’12-1Q’15 (Mboe/d) • Downspacing, infrastructure, operational efficiencies drive upside
SAN JUAN BASIN Oil and Natural Gas Development Opportunities • Gallup Oil: 400+ locations, ~100,000 acres • Natural gas: potential for future development opportunities • Established infrastructure
PICEANCE BASIN Cash Flow + Resource Potential • Vertical: Deep inventory (10,000 locations) with infrastructure in place • Niobrara/Mancos: 15 -20 Tcfe stacked-pay resource potential • Stable cash flows provide financial flexibility
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WPX is an Attractive Investment Opportunity Core Acreage
WPX holds core acreage in each of its basins
Deep Oil Inventory
Decades of drilling inventory with ~4,600 quality drillable locations in the Delaware, Williston and San Juan Gallup
Massive HBP Natural Gas Option
Natural gas holdings exposed to growing demand in western markets
Financing and Delevering Options
Ability to efficiently finance transaction with cash flow growth and deleveraging options
Visibility to Growth
High returns drive future production and returns growth
A Transformational Transaction | July 2015
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Appendix
Delaware Basin Capital, EUR, Type Curves
Product Mix WI / NRI D&C ($MM) EUR (Mboe) Oil- Initial Rate (BBl/d) Oil - Initial Eff. Decline (%/yr) B Factor
Wolfcamp A
2nd Bone Spring
Delaware Vert.
Oil: 58% Gas: 25% NGL: 17% 75.5% / 57.3% 7.0 670 655 79% 1.3
Oil: 51% Gas: 26% NGL: 23% 73.2% / 58.9% 5.5 550 712 86% 1.3
Oil: 61% Gas: 20% NGL: 19% 96.7% / 78.2% 2.4 290 315 85% 1.8
EUR (BOE)
Assumptions
$ per BOE ► ► ►
LOE: $4.95 Operating Taxes: $2.90 Oil Netbacks: $7.50
55% ROR
400
EUR (BOE)
EUR (BOE)
450
350 300 250 200 1,000
2,000
3,000
800 750 700 650 600 550 500 450 400 4,000
D&C ($M) 55% ROR
45% ROR
6,000
7,000
8,000
D&C ($M)
Capital/EUR Sensitivity Curve Delaware Vertical
500
900 850 800 750 700 650 600 550 500 5,000
Capital/EUR Sensitivity Curve Wolfcamp A
35% ROR
45% ROR
35% ROR
25% ROR
Capital/EUR Sensitivity Curve 2nd Bone Spring
5,000
6,000
D&C ($M) 25% ROR
55% ROR
45% ROR
35% ROR
25% ROR
Note: Based on the outlook pricing assumptions on slide 15. A Transformational Transaction | July 2015
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Reserves Summary RKI YE2014
WPX YE2014
COMBINED YE2014
Net Oil Net Gas Net NGL Net Boe (MMbbls) (Bcf) (MMbbls) (MMboe)
Net Oil Net Gas Net NGL Net Boe (MMbbls) (Bcf) (MMbbls) (MMboe)
Net Oil Net Gas Net NGL Net Boe (MMbbls) (Bcf) (MMbbls) (MMboe)
PDP
60
2,090
44
452
PDP
26
123
13
59
PDP
86
2,213
57
512
PUD
71
1,060
27
274
PUD
14
91
13
42
PUD
85
1,151
40
316
Total Proved
131
3,150
71
727
Total Proved
40
214
26
102
Total Proved
171
3,364
97
828
A Transformational Transaction | July 2015
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Total Proved Reserves (MMbbls)
300 250 200 150 100 50
0
WPX Energy
RKI
Pro Forma WPX
33% increase in liquids reserves NOTE: Due to rounding totals may not foot.
Pro Forma WPX Hedges
Updated: July 8th, 2015
Jul - Dec 2015 Volume/Day Average Price
2016 Volume/Day Average Price
2017 Volume/Day Average Price
Natural Gas (MMBtu)
Fixed Price Swaps
435,929
$4.05
302,132
$3.83
-
-
Costless Collars
50,000
$4.00 - $4.50
-
-
-
-
MidCon Basis Swaps
20,000
($0.18)
-
-
-
-
Rockies Basis Swaps
280,000
($0.17)
-
-
-
-
San Juan Basis Swaps
107,500
($0.11)
-
-
-
-
SoCal Basis Swaps
50,000
$0.08
-
-
-
-
30,872
$85.14
25,049
$62.23
5,554
$65.30
-
-
8,500
$84.27
-
-
Natural Gas Basis (MMBtu)
Crude Oil (bbl) Fixed Price Swaps Fixed Price Swaptions1
1 In
connection with several natural gas and crude oil swaps, we entered into swaptions with the swap counterparties granting the counterparty the right, but not the obligation, to enter into an underlying swap with us in the future. Note: Table includes RKI Hedges A Transformational Transaction | July 2015
21
Disclaimer The information contained in this summary has been prepared to assist you in making your own evaluation of the Company and does not purport to contain all of the information you may consider important in deciding whether to invest in shares of the Company’s common stock. In all cases, it is your obligation to conduct your own due diligence. No persons have been authorized to make any representations other than those contained in this communication, if any, and if given or made, such representations should not be considered as authorized. This communication includes and references forward-looking statements, including but not limited to those regarding the proposed transaction between the Company and RKI Exploration & Production, LLC (“RKI”) (the “Transaction”) and the transactions related thereto, the future performance of their businesses, the synergies of the Company and RKI, and similar things. These statements also relate to our business strategy, goals and expectations concerning our market position, future operations, margins and profitability. Forward-looking statements may use the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will,” “would,” “forecast” and similar terms and phrases to identify forward-looking statements, and include the assumptions that underlie such statements. Although the Company believes the assumptions upon which these forward-looking statements are based are reasonable, there can be no assurance that the results implied or expressed in such forward-looking statements or information or the underlying assumptions will be realized and that actual results of operations or future events will not be materially different from the results implied or expressed in such forward-looking statements or information. These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including but not limited to: the ability of the parties to consummate the Transaction in a timely manner or at all; satisfaction of the conditions precedent to consummation of the Transaction, including approval by RKI’s members; the possibility of litigation (including related to the Transaction itself); the Company’s ability to successfully integrate RKI’s operations, technology and employees and realize the expected benefits of the Transaction, on the expected timeline or at all; unknown, underestimated or undisclosed commitments or liabilities; the level of demand for the combined companies’ products, which is subject to many factors, including uncertain global economic and industry conditions, and natural gas and oil prices generally; state and federal environmental, economic, health and safety, energy and other policies and regulations, including those related to climate change and any changes therein, and any legal or regulatory investigations, delays or other factors beyond the control of the Company or RKI; and other risks described in the Company’s SEC filings. The forward-looking statements in this communication speak only as of the date of this communication. Under no circumstances should the inclusion of the forward-looking statements or information be regarded as a representation, undertaking, warranty or prediction by the Company or any other person with respect to the accuracy thereof or the accuracy of the underlying assumptions, or that the Company will achieve or is likely to achieve any particular results. The forward-looking statements or information are made as of the date hereof and the Company disclaims any intent or obligation to update publicly or to revise any of the forward-looking statements or information, whether as a result of new information, future events or otherwise. Recipients are cautioned that forward-looking statements or information are not guarantees of future performance and, accordingly, recipients are expressly cautioned not to put undue reliance on forward-looking statements or information due to the inherent uncertainty therein. Unless otherwise indicated, in this presentation, all reference to RKI, its business or the acquisition give effect to the sale or transfer of RKI’s nonPermian assets.
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Reserves Disclaimer The SEC requires oil and gas companies, in filings made with the SEC, to disclose proved reserves, which are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible – from a given date forward, from known reservoirs, under existing economic conditions, operating methods, and governmental regulations. The SEC permits the optional disclosure of probable and possible reserves. We have elected to use in this presentation “probable” reserves and “possible” reserves, excluding their valuation. The SEC defines “probable” reserves as “those additional reserves that are less certain to be recovered than proved reserves but which, together with proved reserves, are as likely as not to be recovered.” The SEC defines “possible” reserves as “those additional reserves that are less certain to be recovered than probable reserves.” The Company has applied these definitions in estimating probable and possible reserves. Statements of reserves are only estimates and may not correspond to the ultimate quantities of oil and gas recovered. Any reserve estimates provided in this presentation that are not specifically designated as being estimates of proved reserves may include estimated reserves not necessarily calculated in accordance with, or contemplated by, the SEC’s reserves reporting guidelines. Investors are urged to consider closely the disclosure regarding our business that may be accessed through the SEC’s website at www.sec.gov. The SEC’s rules prohibit us from filing resource estimates. Our resource estimations include estimates of hydrocarbon quantities for (i) new areas for which we do not have sufficient information to date to classify as proved, probable or even possible reserves, (ii) other areas to take into account the low level of certainty of recovery of the resources, (iii) uneconomic proved, probable or possible reserves and (iv) estimated ultimate recovery. Resource estimates do not take into account the certainty of resource recovery and are therefore not indicative of the expected future recovery and should not be relied upon. Resource estimates might never be recovered and are contingent on exploration success, technical improvements in drilling access, commerciality and other factors.
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