WPX Energy Inc., Tulsa, and Howard Energy Partners (HEP), San Antonio, have agreed to form a 50-50 joint venture to develop oil gathering and gas processing systems in the Permian’s Delaware basin.
The combine will support WPX’s drilling program covering 50,000 net acres in the Stateline area in Lea and Eddy counties in New Mexico and Reeves and Loving counties in Texas. WPX has roughly 135,000 net acres in the Delaware basin amid its expansion in the region over the last couple of years (OGJ Online, Jan. 13, 2017).
The agreement calls for operator HEP to complete the buildout of a 50-mile crude gathering system, which is 50% complete and has 40 wells tied in, and begin building a cryogenic gas processing complex with a planned initial capacity of 400 MMcfd. The deal is expected to close in the third quarter.
The firms expect to wrap up the crude gathering project in first-half 2018 and believe it can be expanded with minimal capital investment through additional horsepower and line looping. The firms also expect to complete the gas processing complex’s first 200-MMcfd train during first-half 2018. The second 200-MMcfd train is expected to start up by mid-2019.
HEP will fund the first $263 million of JV capital expenditures, including a $132-million carry for WPX, which also is receiving $300 million upfront. To fund the JV, HEP partnered with GIC Private Ltd., Singapore’s sovereign wealth fund, as well as existing unitholders Alinda Capital Partners and Alberta Investment Management Co. (AIMCo).
WPX’s Delaware gas movement
WPX is retaining sole ownership of its Stateline gas and water gathering systems that consist of 375 miles of scalable existing systems. The firm believes those assets are worth more than the $500 million of implied value at the time of its acquisition of RKI Exploration & Production (OGJ Online, July 15, 2015).
WPX also recently completed an agreement with WhiteWater Midstream LLC providing WPX with 300,000 MMbtu/day of gas transportation capacity from the Stateline area to the Waha hub in Pecos County, Tex., and 10% ownership interest in the Agua Blanca pipeline. As part of the deal, WPX has the right to increase its capacity to 500,000 MMbtu/day and its ownership to 20%.
Agua Blanca will initially consist of 75 miles of 36-in. OD pipe with a capacity of 1.25 bcfd, expandable to 1.75 bcfd. Its initial path will be from Orla, Tex., to Waha, servicing portions of Culberson, Loving, Pecos, Reeves, and Ward counties. It will have multiple direct downstream connections including to the Trans-Pecos header.
Initial commissioning of the Agua Blanca project is expected during the fourth quarter, and the complete path from Orla to Waha is expected operational by the end of first-quarter 2018.
WPX also recently signed an agreement to ship as much as 200,000 MMbtu/day of gas from Waha to Katy, Tex., starting in November.
Austin-based WhiteWater was founded in 2016 and is backed by equity commitments from Denham Capital Management and Ridgemont Equity Partners.
Contact Matt Zborowski at [email protected].
