WPX To Buy Additional Acreage, Production In The Permian -- February 15, 2020

Old news, reported back on December 16, 2019, in The Denver Post:

Oklahoma-based WPX Energy said Monday that it is acquiring Denver-based Felix Energy in a $2.5 billion deal that will add to its holdings in the Permian Basin in Texas.

From that newspaper report, these data points:

• Felix Energy, founded by private equity firm EnCap Investments
• operates in the Delaware Basin, west Texas
• 1,500 undeveloped sites in the east part of the basin
• expected production of roughly 60,000 boepd
• last major deal by WPX in the Permian Basin: January, 2017, during the height of the buying there
• at that time, WPX acquired assets in the Delaware Basin from Panther Energy and its partners for $775 million, or around $30,000/acre
• pricing on the new acquisition: about $10,000/acre after adjusting for production value
• note: "The difference in price and the emphasis by WPX on how the deal will help it fund returns to shareholders and generate free cash flow highlight how conditions have changed, he added. A couple of years ago, a company making a similar deal “would be focused on showing how it will be able to ramp up drilling and accelerate growth,” Dittmar said."

Incredibly, unless I missed it, and I checked the article three times, the number of gross/net acres being sold was not provided.

More detail from WPX letter to stockholders, dated February 5, 2020, data regarding Felix:

• based in Denver, CO
• core operations in the Delaware Basin: Loving, Reeves, Ward and Winkler counties in west Texas
• 57,620 net acres
• substantially all operated by Felix
• Wolfcamp shale and Bone Spring shale
• Felix operates 182 wells in the Delaware Basin
• owns interests in 175 wells in the Delaware Basin operated by others
• production: 47,000 boepd; 72% oil
• proved reserves: 577.8 million boe of which 15% were proved developed

Back of the envelope:

• The Permian deal as noted above
• $2.5 billion / 57,620 net acres = $40,000 / net acre
• but as noted in The Denver Post article, after adjusting for production values, about $10,000 / acre
• proved reserves: 577,775,000 boe
• $2.5 billion / 577,775,000 boe = $4.33/boe
• 577,775,000 boe / 57,620 net acres = 10,000 boe/net acre
• Tier 1 Bakken
• 12 wells per 1280-acre drilling unit
• each well: 1 million boe EUR
• 12 million boe/1280-acre drilling unit = 9,375 boe/acre
• 24 wells per 1280-acre drilling unit
• each well: 1 million boe EUR
• 24 million boe/1280-acre drilling unit = 18,750 boe/acre
• Tier 1 Bakken: upwards of 95% oil, although that is coming down over time

Disclaimer: I often make simple arithmetic errors. My "back of the envelope" calculations are only done for my benefit to help me put these multi-billion-dollar deals in perspective.