WPX Energy Inc (NYSE:WPX) plans to enter into the Permian basin by buying out a private firm, RKI Exploration & Production LLC. Sources revealed that the acquisition deal is worth $2.35 billion.
According to the terms of the deal, the oil and gas producer will also absorbRKI’s debt that roughly amounts to $400 million. The deal is a strategic move for WPX because it will finally gain access to the Permian basin of Texas and New Mexico. This region is of great interest to WPX because it is the fastest growing U.S. shale oil field. It also contains rich oil reserves, making it an ideal acquisition for the company.
WPX’s deal ensues an announcement by Noble Energy, Inc. (NYSE:NBL) two months ago that it had plans to acquire Rosetta Resources Inc. (NASDAQ:ROSE) for $2 billion. This deal marked the first momentous deal since the oil industry became unstable in 2014. Crude oil prices dropped by more than 50% from previous highs, leading to huge losses for oil firms. As a result, some major acquisitions in the oil industry have taken place such as the$70 billion deal between Royal Dutch Shell plc (ADR) (NYSE:RDS.A) and BG Group.
The reserves that WPX will acquire produce roughly 22,000 barrels of oil on a daily basis. The company hopes that the acquisition will allow it to boost its oil production so that it can almost reach a third of the company’s total output. Currently, WXP is only able to achieve 20% from oil outputs.
The company will therefore have to increase the number of rigs for to boost drilling in the Permian basin. Currently, there are four rigs but the company plans to increase the number to 6 rigs. With the low oil prices hovering around $50 per barrel, some oil companies are increasing the number of rigs in the field to boost production. Some analysts speculate that the oil prices might eventually go up, and this would be advantageous for many oil firms particularly those with recent acquisitions.
