WPX Energy Inc., the oil and gas explorer spun off from Williams Cos., has agreed to buy closely held RKI Exploration & Production LLC for $2.35 billion.
WPX will also assume $400 million of debt to acquire RKI, which has liquids-rich fields in the Permian Basin, WPX said in a statement Tuesday. The majority of RKI’s leaseholds are located in Texas and New Mexico, where the company operates four rigs, it said.
The deal advances WPX’s strategy to increase profit over the next five years by raising its oil output fivefold, Peter Pulikkan, a New York-based analyst for Bloomberg Intelligence, said Tuesday in an interview.
“WPX is Colorado’s largest gas producer,” Pulikkan said. “This helps them move to a more balanced mix, enabling them to focus on the commodity with the best returns.”
WPX shares rose 5.9 percent to $11.77 at 10:03 a.m. in New York after touching $11.88. As of Monday, the shares, which have 11 buys and 7 holds, had fallen 4.4 percent this year. The statement was released before the start of regular trading.
To finance the transaction, WPX announced a sale of $1.2 billion of senior unsecured notes, 27 million shares and $300 million of convertible preferred stock.
“This further drives high-margin oil growth, accelerates our portfolio transition to more liquids, and solidifies our premier position in the western U.S.,” Rick Muncrief, WPX president and chief executive officer, said in the statement.
Muncrief had talked in March about his interest in expanding the company’s footprint.
“I am now comfortable in making a move into a new basin,” he said in an interview in New Orleans at the Scotia Howard Weil Conference.
Output in 2017 will be 36 percent oil, WPX said in slides prepared for a conference call with investors.
The Permian Basin is the most active oil play in the U.S. and showed the biggest improvement in last week’s Baker Hughes Inc. weekly report, with eight rigs brought back to work. The deal is WPX’s largest since spinning out from Williams in 2011 and its first foray into the Permian, a large swathe of oil-producing rock beneath West Texas and southeastern New Mexico.
WPX is buying leases in the Delaware Basin, the less-developed western half of the Permian,
RKI CEO Ronnie K. Irani, a former senior executive with Dominion Resources Inc., founded the Oklahoma City-based company in 2005, according to its website. It has another collection of assets in the Powder River Basin of Montana and Wyoming, which is not included in the deal with WPX. RKI will divest or transfer out those assets before completing the deal with WPX, according to the statement.
WPX has operations in the Williston, Piceance and San Juan basins, three oil and gas patches in the midwestern U.S.
(An earlier version of this story corrected a reference to WPX Energy’s corporate structure.)