October 9, 2014
WPX Strategic Update
Rick Muncrief
President & CEO, WPX Energy
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. All information contained herein, including any estimates or
projections, is based upon information provided by the Company. Any estimates or projections with respect to future performance have
been provided to assist you in your evaluation but should not be relied upon as an accurate representation of future results. No persons have
been authorized to make any representations other than those contained in this summary, and if given or made, such representations should
not be considered as authorized.
Certain statements, estimates and financial information contained in this summary constitute forward-looking statements or information.
Such forward-looking statements or information involve known and unknown risks and uncertainties that could cause actual events or results
to differ materially from the results implied or expressed in such forward-looking statements or information. While presented with numerical
specificity, certain forward-looking statements or information are based (1) upon assumptions that are inherently subject to significant
business, economic, regulatory, environmental, seasonal, competitive uncertainties, contingencies and risks including, without limitation, the
ability to obtain debt and equity financings, capital costs, construction costs, well production performance, operating costs, commodity
pricing, differentials, royalty structures, field upgrading technology, and other known and unknown risks, all of which are difficult to predict
and many of which are beyond the Company's control, and (2) upon assumptions with respect to future business decisions that are subject
to change.
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. 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.
WPX Strategic Update | October 2014
2
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 and (iii) uneconomic proved, probable or possible reserves. 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.
WPX Strategic Update | October 2014
3
WPX Repositioning Update
Agreed to sell our 69% equity interest in Apco Oil & Gas
Control ~84,000 net acres in the San Juan Gallup, 163% increase from year-end 2013
Other value-enhancing transactions
►
Trail Ridge joint development carry on nearly 400 wells
►
Sold mature Powder River coalbed methane acreage
►
Sold working interest in Piceance wells to Legacy Reserves
Early exit program
►
Approximately 100 employees choose to accept the package
►
Estimated year-end employee count of 1,025 - 1,050, from continuing operations
►
~15% employee reduction from year-end 2013
WPX Strategic Update | October 2014
4
WPX Operational Update
San Juan Gallup
►
3rd rig added; record spud-to-rig release, 9.5 days
►
Completing first two 7,500ʹ laterals
Williston
►
Initial result of larger stimulations encouraging
Reaffirm full-year production guidance ranges, adjusted for Powder River sale
3rd Quarter
Estimate
Powder River
Discontinued Ops
Total 3rd Quarter
adjusted for PRB
Natural Gas - MMcf/d
908 - 918
145
763 - 773
Oil - Mbbl/d
32.1 - 32.3
NGL - Mbbl/d
17.4 -17.8
–
17.4 - 17.8
1,205.0 - 1,218.3
145.0
1,060.0 - 1,073.3
Total - MMcfe/d
32.1 - 32.3
WPX Strategic Update | October 2014
5
WPX 20/20 Vision
By 2020, WPX intends to…
3x INCREASE MARGINS
and
5x INCREASE OIL PRODUCTION
which should lead to…
3x INCREASE MARKET CAP
WPX Strategic Update | October 2014
6
20/20 Vision – Measurable
Domestic
Oil Production
Domestic
Oil
(Mbbl/d)
Production
(MMbbl)
MarginsMargins
(per Mcfe)1
$4.50
90
$3.93
$3.00
$2.50
$2.00
$1.50
$1.31
$1.00
50
40
30
20
$0.00
0
3X INCREASE
MARGINS
$10
60
10
YE19
$12
70
$0.50
2013
$12.00
80
Oil Production (Mbbl/d)
Margins (per Mcfe)
$3.50
$14
81
Billion Dollars
$4.00
Market Cap ($B)
$8
$6
$4.00
$4
16
$2
$-
2013
2020
YE19
5X OIL GROWTH
2014
YE19
3X INCREASE
MARKET CAP
1
Reported 2013 consolidated cash flow from operations ($636,308) - international cash flow from operations ($61,246) = calculated domestic cash flow from operations $575,061,
divided by domestic production (439,554 MMcfe) = domestic CFFO per domestic Mcfe $1.31
WPX Strategic Update | October 2014
7
20/20 Vision not Dependent on Raising Commodity Prices
Bullish natural gas longer-term, anticipate $3.50 - $4.50 pricing over the next 3 years
►
►
►
Coal continues to lose power generation market share
Advantaged feedstock pricing leads to incremental domestic industrial demand
LNG exports will take place, but at a measured pace – exports begin 2016 and later
Despite short-term volatility in oil markets, anticipate $80.00 - $100.00 per barrel
over the next 3 years
►
►
Supply/demand fundamentals remain relatively balanced for the foreseeable future
New regulations allowing condensate exports provide additional source of domestic demand
Major capital projects increase NGL demand longer-term
►
►
►
Multiple large scale petrochemical cracker projects on line beginning 2017
Propane export capacity doubles by 2017
New ethane export facilities in-service beginning 2016
Balance sheet strengthening
►
►
►
Balance sheet strengthens during 5-year plan
Enables flexibility in lower commodity price environment
Provides ability to be opportunistic
WPX Strategic Update | October 2014
8
WPX 20/20 Vision - Identity
WPX will be known for…
Margin
Growth
Operational
Performance
Technical
Excellence
WPX Strategic Update | October 2014
9
Foundation for 3x Margin Expansion
SUPPLY
CHAIN
MGMT.
Creation of enterprise supply chain management
TRANSPORTATION
ROLL-OFF
IMPLEMENT
NEW TECHNOLOGIES
COMMODITY DIVERSITY
HIGH GRADE PORTFOLIO
Rockies Express agreement expires
November 2014
1.5-mile laterals in San Juan Gallup
Creating a more
balanced portfolio
Sold APCO and
Powder River
assets
WPX Strategic Update | October 2014
10
Achieving 20/20 Vision
Accelerate Oil Development
• Highest portfolio returns
• Increases operating margins
• Brings highest-value projects
forward
Culture, Communication
and Cost Focus
• Establish entrepreneurial
culture
• Ensure organization alignment
• Right-sized cost structure
Focused, Long-Term
Portfolio Management
Focus on profitable growth
Build Asset Scale
• Create significant drilling
inventory
• Increase commodity optionality
• Scale will drive operational
efficiency
• Exploration/bolt-on acquisitions
• Allocate capital to highest
Focused, Long-Term
long-term
returns
Portfolio
Management
• •More
balanced
commodity
Allocate capital to highest
long term
portfolio
returns
• •Divest
assets
without
longStrive for
balanced
commodity
portfolio
term
potential
• Divest assets without superior long term
• Use
new technology
potential
increase
portfolio
• toImplement
new
technology upside
to increase
portfolio upside
WPX Strategic Update | October 2014
11
20/20 Vision: Disciplined Focus on Profitable Growth
AREAS OF FOCUS
INCREASE MARGINS
• Commodity diversification
• Reduce DD&A and LOE through
operational improvements
• Optimize SG&A costs and GP&T expenses
AREAS OF FOCUS
INCREASE RETURNS
• Reduce D&C costs
• Utilize new technology to decrease F&D costs
• Disciplined capital allocation to highest
long-term returns
AREAS OF FOCUS
INCREASE INVENTORY
• Develop current resources
• Oil-focused exploration activities
• Pursue bolt-on acquisitions
WPX Strategic Update | October 2014
12
20/20 Vision: Disciplined Focus on Profitable Growth Underway
ACTIONS TAKEN
INCREASE MARGINS
✓ Rockies Express agreement expires
□
November 2014
✓ Successful early exit program completed
□
✓ Creation of Supply Chain Management group
□
ACTIONS TAKEN
INCREASE RETURNS
✓ Larger Williston completions
□
✓ Longer laterals in the San Juan
□
✓ Linking of capital and hedging programs
□
ACTIONS TAKEN
INCREASE INVENTORY
✓ Increase San Juan Gallup acreage to ~84,000,
□
163% increase from year-end 2013
✓ Infill density project adds 200 locations
□
in the Williston
✓ Successful 10-acre spacing pilot in Ryan Gulch
□
WPX Strategic Update | October 2014
13
Premier Western Energy Producer
High-Quality Rocks
WILLISTON
BASIN
(Rocks matter)
Established Infrastructure
(Infrastructure matters)
PICEANCE
BASIN
Access to Premier Markets
(Markets matter)
SAN JUAN
BASIN
Commodity Optionality
(Flexibility matters)
Natural Gas
Oil
Natural Gas and Natural Gas Liquids
Exit Marcellus over time
WPX Strategic Update | October 2014
14
San Juan Basin
Why We Like It:
30+ years of experience in the basin
San Juan Gallup
►
►
►
Highest returns in the portfolio
Production stream: 70% oil, 15% natural gas
and 15% NGL
High-quality light sweet oil
Return enhancement from longer laterals
Ample oil takeaway capacity
►
►
2015 basin capacity 100 Mbbl/d
2016 basin capacity 125 Mbbl/d
WPX Strategic Update | October 2014
15
Williston Basin
Why We Like It:
Highest quality rock in the play
►
►
10 years of inventory
Production stream: 85% oil, 7% natural gas,
8% NGLs
Opportunity for operational optimization
►
►
Targeting $10MM drilling and
completion cost
Targeting $6.00 per barrel LOE
Evaluating ultimate downspacing
Initial results on larger stimulations
very encouraging
WPX Strategic Update | October 2014
16
Larger Williston Stimulations – Peak Month Production
Middle Bakken Peak Month1
Three Forks Peak Month2
14% increase
13% increase
880
800
860
780
840
760
Barrels of Oil
Barrels of Oil
820
800
780
760
740
720
700
680
740
720
660
700
640
3 Million Pounds
3.8 Million
Pounds
6.0 Million
Pounds
3 Million Pounds
3.8 Million
Pounds
6.0 Million
Pounds
Evaluating Early Performance and Larger EURs
1 Middle Bakken- Mandaree Only: 38 wells with 3 MM lbs. proppant resulted in 760 peak month bopd. 3 wells with 3.8 MM lbs. proppant resulted in 836 peak month bopd (an increase of
10% from 3 MM lbs. usage). 3 wells with 6 MM lbs proppant resulted in 866 peak month bopd (an increase of 14% from original 3 MM lbs. usage).
2 Three
Forks- 37 wells with 3MM lbs. proppant resulted in 703 peak month bopd. 4 wells with 3.8 MM lbs. proppant resulted in 699 peak month bopd (decrease of 1% from 3 MM lbs.
usage). 3 wells with 6 MM lbs. proppant resulted in 792 peak month bopd (an increase of 13% from original 3MM lbs. usage)
WPX Strategic Update | October 2014
17
Early Results From Larger Stimulations
Ruby Pad Cumulative Production
60,000
Middle Bakken Ruby 31-30 HA
Three Forks Ruby 31-30 HW
50,000
Cumulative barrels of oil
Three Forks Ruby 31-30 HX
Original Middle Bakken 3MM Type Curve
EUR (784 MBOE)
40,000
Original Three Forks 3MM Type Curve
EUR (658 MBOE)
30,000
20,000
10,000
0
0
10
20
30
40
50
60
Days After Clean Out
WPX Strategic Update | October 2014
18
Piceance Basin
Why We Like It:
Massive resource and scale
►
> 25 years of drillable inventory
Exploration upside in the Niobrara
and Mancos
►
Current production of 13.7MMcf/d
@ 7,325 psi
Excess regional takeaway capacity
with access to premium markets
Production stream 80% natural gas,
20% NGLs
WPX Strategic Update | October 2014
19
Resource Assessment Underway
Potential Catalysts for Growth
WILLISTON
SAN JUAN
►
Additional
Downspacing
►
►
Larger
stimulations
►
►
Longer laterals
in the Gallup
Increasing
leasehold
Greater EURs
PICEANCE
EXPLORATION
►
Ryan Gulch
►
Early basin entry
►
Niobrara
►
Liquids focused
►
Mancos
► Must
be scalable
WPX Strategic Update | October 2014
20
WPX Future: 2015 Outlook
2015 guidance will be released December 2014
Current hedging program provides capital flexibility
►
~50% of oil production hedged at an average price of $94.88 per barrel
►
~50% of natural gas hedged at an average price of $4.26 per MMBtu1, using
hedges, swaps and collars
Year-over-year oil growth of at least 45%
70% - 80% of 2015 capital oil focused
►
9 - 10 rigs in the Williston and San Juan Gallup
►
Includes oil-focused exploration and land acquisitions
Capital allocated to the highest returns in the portfolio
1The
natural gas hedge price is the weighted average price of our swaps and the floor of our collars.
WPX Strategic Update | October 2014
21
Western Prices Have Increased Relative to Eastern Locations
0.50
West Basis Strengthening1
East Basis Weakening2
$0.33
0.00
$ per MMBtu
($0.18)
($0.18)
($0.25)
-0.50
-1.00
($1.15)
-1.50
($1.74)
-2.00
2006 to 2010
2011 to Now
3 Yr Fwd
3
2006 to 2010
2011 to Now
3 Yr Fwd
3
1
Northwest Wyoming/Rocky Mountain basis
Dominion South basis
3 3-year average strip price as of 10/3/2014
2
WPX Strategic Update | October 2014
22
Strong Western Supply/Demand Fundamentals Through 2019
Northwest
2.0 Bcf/d
demand increase
through 2019
Deman
d +2.0
Bcf/d
Demand
+0.5
Bcf/d
Rockies and
San Juan Basin
production
flat to declining
through 2019
Southwest
0.5 Bcf/d
demand increase
through 2019
Mexico
Demand
+1.8
Bcf/d
1.8 Bcf/d
demand increase
through 2019
WPX Strategic Update | October 2014
23
Our Transport Costs are Decreasing while Northeast Producers’ are Increasing
Northeast Producer 1
WPX
500,000
Northeast Producer 2
450,000
Transportation Costs ($/MM)
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
2014 1,2
1
2
2017
2014
2017 2
2014
2017 2
Includes demand obligations related to Rockies sale/resale agreement
Gross firm transportation obligations taken from Producer’s 10-K, company presentations and publicly available data
WPX Strategic Update | October 2014
24
Foundational Elements for 20/20 Vision
“We are building
one vision,
one culture,
one mission.”
COST
FOCUS
RISK
TOLERANCE
ENTREPRENEURIAL
MINDSET
CULTURE OF
ACCOUNTABILITY
WPX Strategic Update | October 2014
25
WPX 20/20 Vision
By 2020, WPX intends to…
3x INCREASE MARGINS
and
5x INCREASE OIL PRODUCTION
which should lead to…
3x INCREASE MARKET CAP
WPX Strategic Update | October 2014
26
Appendix
Hedging Overview
As of 10/01/2014
Balance of 2014 1
Volume/Day
Average Price
2015
Volume/Day
Average Price
Natural Gas (MMBtu)
Fixed Price Swaps2
315,000
$4.19
272,055
$4.31
Costless Collars
190,000
$4.04 - $4.66
50,000
$4.00 - $4.50
Dominion Basis Swaps
57,500
($0.73)
MidCon Basis Swaps
30,000
($0.19)
12,500
($0.16)
Rockies Basis Swaps
142,500
($0.15)
150,000
($0.11)
San Juan Basis Swaps
255,000
($0.15)
75,000
($0.10)
SoCal Basis Swaps
72,500
$0.13
20,000
$0.18
14,975
$96.01
20,236
$94.88
Ethane Swaps
3,279
$0.29
Propane Swaps
492
$1.17
Isobutane Swaps
656
$1.37
Normal Butane Swaps
656
$1.34
1,639
$2.06
Natural Gas Basis (MMBtu)
Crude Oil (bbl)
Fixed Price Swaps2
Natural Gas Liquids (bbl)3
Natural Gasoline Swaps
1
Balance of 2014 is September - December.
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.
3 All Natural Gas Liquids swaps are priced at Mont Belvieu.
2 In
WPX Strategic Update | October 2014
28
Williston Type Well Reflecting Infill Reserves – Target D&C
80%
700
1200
600
1000
500
800
400
600
300
400
200
70%
60%
B-tax IRR
1400
Cum Oil Mboe
Oil Rate Boe/d
Type Curve
50%
40%
30%
20%
200
100
30 + Yrs
0
10%
0
0
1
2
3
4
5
6
7
8
9
10
Middle Bakken: 649 Mboe EUR
Three Forks: 537 Mboe EUR
CUM 649 Mboe EUR
CUM 537 Mboe EUR
IRR (B-tax)
Middle Bakken
649 Mboe EUR
$10.0MM D&C
IRR (B-tax)
Three Forks
537 Mboe EUR
$10.0MM D&C
$80.00
39%
23%
$85.00
47%
29%
$90.00
54%
34%
$95.00
63%
40%
$100.00
71%
46%
WTI
Oil Price
Middle Bakken: 649 Mboe EUR, $10.0 MM D&C
Three Forks: 537 Mboe EUR, $10.0 MM D&C
0%
$80.00
$85.00
$90.00
$95.00
WTI Oil Price
$100.00
Assumes no EUR
increase for larger
stimulations
►
►
►
►
►
►
►
Middle Bakken: 649 Mboe EUR
Three Forks: 537 Mboe
Proppant: 6 million pounds
WI: 82%, NRI: 65%
Product Mix: Oil 85%, Gas 7%, NGL 8%
Drillable locations: ~625
Spacing assumption: 6 Middle Bakken and 5 Three
Forks per 1,280 spacing unit
WPX Strategic Update | October 2014
29
San Juan Gallup Oil Type Wells – Target D&C
Type Curve
180%
160%
600
700
140%
600
120%
Oil Rate Boe/d
500
500
400
400
300
300
200
30 + Yrs
B-tax IRR
800
Cum Oil Mboe
700
100%
80%
60%
200
40%
100
100
0
765 Mboe EUR, $6.1 MM D&C, 7,600' lateral
20%
0
0
1
2
3
4
5
765 Mboe EUR, 7,600' lateral
CUM 765 Mboe
6
7
8
9
10
450 Mboe EUR, $4.8 MM D&C, 4,600' lateral
0%
$80.00
450 Mboe EUR, 4,600' lateral
CUM 450 Mboe
WTI
Oil Price
IRR (B-tax)
765 Mboe EUR
$6.1MM D&C
IRR (B-tax)
450 Mboe EUR
$4.8MM D&C
$80.00
91%
55%
►
$85.00
106%
66%
►
$90.00
122%
77%
$95.00
138%
88%
►
$100.00
156%
100%
►
►
►
►
►
$85.00
$90.00
$95.00
WTI Oil Price
$100.00
23 Stages, 7,600 ft. lateral
14 Stages. 4,600 ft. lateral
EUR: 765 Mboe; D&C: $6.1 million
EUR: 450 Mboe; D&C: $4.8 million
WI: 90%. NRI: 75%
Product Mix: Oil 70%, Gas 16%, NGL 14%
Drillable locations: ~425
Spacing assumption: 160 Acres
WPX Strategic Update | October 2014
30
Piceance Highlands Ryan Gulch Type Well – Target D&C
Type Curve
60%
2,500
2,500
50%
2,000
1,500
1,000
1,000
500
40%
B-tax IRR
1,500
Cum Gas MMcfe
Gas Rate Mcfed
2,000
30%
20%
500
30 + Yrs
10%
0
2.16 Bcfe EUR, $1.8MM D&C
0
1
2
3
4
5
2.16 Bcfe EUR, $1.8MM D&C
NYMEX Gas Price
6
7
8
9
0%
$3.50
10
CUM 2.16 Bcfe
IRR (B-tax)
$3.50
27%
$4.00
35%
$4.50
45%
$5.00
56%
►
►
►
►
►
$4.00
$4.50
NYMEX Gas Price
$5.00
EUR 2.16 Bcfe, D&C $1.8 million
WI: 51%. NRI: 44.6%
Product Mix: Gas 82%, NGL 14%, Oil 4%
10-12 stages across 3,000-ft vertical stacked pay
Drillable locations: 3P = 4,319 at YE2013
WPX Strategic Update | October 2014
31