Independent oil & gas operator,
WPX Energy Inc.
) has decided to form a master limited partnership (MLP) in the
first half of 2014. MLP as an investment vehicle is seeing a
revival among independent oil & gas operators - worth
mentioning here are names like
Spectra Energy Corp.
) among others which have opted for such a structure. An MLP
enables operators to unlock true value of their natural resource
holdings. In addition, an MLP also generates funds needed to
After receiving the necessary permission to form an MLP, WPX
Energy plans to issue common units representing limited partner
units in the MLP. These units will hold working interests in
mature, producing natural gas properties located in the Piceance
Basin in Colorado.
WPX Energy will initially contribute to the development of
natural gas properties in the Piceance Basin and will then
utilize the proceeds from the issue of the MLP units. Apart from
the development of natural gas assets, the proceeds will also be
used to replenish the dues under its revolving credit facilities
and for general corporate purpose.
Natural gas usage is on the rise in the U.S. given the emphasis
of the U.S. government to generate more environmentally friendly
electricity. The new fracking technology has made natural gas
extraction both cheap and bountiful.
The clean burning nature of this fossil fuel is gaining
popularity as a power source across the globe. The U.S.
Department of Energy (DOE) has started to grant permission for
export of natural gas. Recently,
Dominion Resources Inc.
) received a much needed nod from the DOE for natural gas
WPX might also in due course, after the MLP has been formed,
apply for natural gas export license. Admittedly, the U.S.
natural gas market is a big one, but there are also too many
players seeking to cash in on the shale boom.
We believe if the U.S natural gas producers start to look beyond
their shores and make long-term natural gas export contracts with
other countries, it will definitely create a new window of
opportunity for earning regular revenues.
WPX Energy currently carries a Zacks Rank #3 (Hold).
DOMINION RES VA (D): Free Stock Analysis
ENBRIDGE INC (ENB): Free Stock Analysis
SPECTRA ENERGY (SE): Free Stock Analysis
WPX ENERGY INC (WPX): Free Stock Analysis
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