July 14–Tulsa-based WPX has agreed to buy Oklahoma City-based RKI Exploration & Production for $2.75 billion in cash, stock and debt.
WPX executives said the company plans to keep RKI’s Oklahoma City and New Mexico offices and their employees. RKI has about 100 employees in Oklahoma City and 30 in Carlsbad, N.M.
“RKI is highly attractive to WPX due to its core acerage, it’s substantial scaleable structure with excess capacity and a proven operational team that will remain in place,” WPX CEO Rick Muncrief said during a conference call Tuesday. “I simply can’t wait to get our hands on these assets.”
The deal is expected to close in the third quarter.
Most of RKI’s assets are in Loving County, Texas, and Eddy County, N.M, in the Permian Basin’s Delaware play. The assets produce 22,000 barrels of oil equivalent per day over 92,000 acres with more than 3,600 gross drilling locations.
The production is about 53 percent oil, 16 percent natural gas liquids and 31 percent natural gas.
“We weren’t looking for just any opportunity. We’ve been looking for the perfect fit,” Muncrief said. “We have charged our team with finding a new basin that could add the best returns to our portfolio, and everything pointed to the Permian, an incredibly hydrocarbon-rich environment characterized by stack play resorviors, extensive production history, long lived reserves and high drilling success rates.”
Under terms of the deal, WPX agreed to pay $2.35 billion in cash and stock and assume about $400 million of RKI debt. The deal comes at a time when much of the oil industry has been stalled by oil prices that are about half of what they were one year ago.
“I said in last quarter’s conference call that opportunities will abound for well maintained, financially strong companies with a clear and compelling business strategy,” Muncrief said. “All the progress we’ve made focusing our business and strengthening our balance sheet has allowed us to be opportunistic.
“Today, we’re a company out front. As with any business, the time to buy is when prices are down. When oil prices are strong again, we probably won’t be buying, we’ll be drilling.”
RKI’s top three executives, including founder and CEO Ronnie K. Irani, will stay on as consultants during the transition, WPX said.
“We’re very pleased that our high-quality Permian holdings will be managed and developed by WPX, a technically minded company that can take the potential of our acreage and infrastructure to significantly higher levels,” Irani said in a statement. “Turning over the reins of RKI to a proven operator is very important to me and our team because of the great pride we have in this exceptional asset base we have amassed and developed over the past 10 years. We’re also very pleased that WPX is an Oklahoma-based company with significant growth prospects which will continue to benefit the state.”
Directors at both companies unanimously approved the merger agreement, and the merger agreement was adopted and approved by the holders of about 85 percent of the issued and outstanding RKI LLC interests following the entry into the merger agreement by RKI.