WPX Energy takes $43 million hit in 1Q

BY ROD WALTON World Staff Writer
Friday, May 04, 2012
5/04/12 at 4:55 AM

Bear-market natural gas prices forced WPX Energy Inc. to take financial impairments that resulted in a $43 million net loss in the first quarter, the Tulsa-based exploration and production company reported Thursday.

The net loss, averaging out to 22 cents per share, was deeper than the $3 million loss recorded during the same period of 2011. WPX Energy was a segment of Williams Cos. Inc. at that time, before it was spun off into a stand-alone company late last year.

CEO Ralph Hill focused on the production positives, noting that WPX increased its daily oil and natural gas liquids volumes by 26 percent. The company, like many, is shifting away from its traditional dry gas-heavy drilling portfolio into oil and NGL plays.

"The shift that's taking place in our production profile is evidence of the diversity and quality we have in our existing properties," Hill said in a statement.

Raw earnings were down only 6 percent "despite decade-low prices for natural gas and a 20 percent drop in our own net realized average price for gas," he said.

The historical focus on natural gas, however, forced a non-cash charge of $11 million on storage and inventory. Prices now at 10-year lows also resulted in a $52 million impairment on certain costs of acquired unproven reserves.

The move to oil is ramping up dramatically. First-quarter volumes produced by WPX increased 150 percent compared with a year ago, averaging 16,100 barrels per day.

The Bakken Shale properties led the way at 7,700 barrels per day. NGL production, mainly in the Piceance Basin of Colorado, averaged more than 30,000 barrels per day, WPX reported.

Natural gas production, at 1.1 billion cubic feet per day, still beat the same period in 2011 by nearly 100,000 cubic feet on average. Piceance Basin production accounted for more than half of that dry gas total.

WPX Energy also has gas production wells in the Marcellus Shale of the Northeast and owns control of Apco Oil and Gas International with its drilling interests in South America.

Later this month, WPX expects to close on the sale of its natural gas assets in the Barnett Shale of North Texas and the Arkoma Basin in Oklahoma. The deal with KKR Natural Resources and Tulsa-based Premier Natural Resources is valued at $306 million.

WPX expects to receive about $275 million in cash for that transaction in the second quarter. WPX held $362 million in cash and cash equivalents as of March 31.

WPX Energy Inc. earnings

	2012 1Q	2011 1Q	Percent change
Revenues	$910 million	$958 million	-5.0%
Net loss	$43 million	$3 million	n/a
Net loss per share	$0.22	$0.02	n/a

Original Print Headline: WPX loses $43 million amid low prices for gas

Rod Walton 918-581-8457
rod.walton@tulsaworld.com