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Morningstar | WPX Operates in the Core of the Williston and Delaware Basins

WPX Energy started out producing natural gas in Colorado's Piceance Basin after the 2011 spin-off from Williams. The company has completely transformed itself since then and is now developing oil-weighted shale acreage in the Delaware and Williston basins (oil volumes doubled between 2016 and 2018). It sold the last of its legacy assets in the Rockies in 2017.The Delaware Basin property has become the cornerstone of the portfolio. The company holds 131,000 net acres in the northern portion of the play, mostly in the highly productive sweet spot where Eddy and Loving counties meet. At the current run rate it could take more than 30 years to work through the potential drilling locations that management has identified. And based on the wells reported thus far, cumulative recoveries could exceed 1,500 thousand barrels of oil equivalent on average (assuming 1.5-mile laterals). That's consistent with a West Texas Intermediate break-even of about $35/bbl, well below our $55/bbl midcycle forecast and on par with the lowest-cost shale producers.Likewise, WPX's Williston Basin acreage is ideally located, near the intersection of Dunn, Mountrail, and McKenzie counties (the most productive region of the play). The company has reported some spectacular well results there and has set the high-water mark in the basin for 90-day and 120-day cumulative production from a single well. We believe this extremely lucrative portion of the play would remain profitable even if WTI crude were to slip under $30/bbl. But with only 10 years of potential runway remaining on WPX's acreage, the scope for ramping activity is limited. The Delaware Basin will be the company's primary growth engine.