WPX Energy Is A Solid Play For Energy Investors

Summary

• WPX Energy, like many of its peers, has been beat down in recent months due to the energy market's volatility.
• Nonetheless, the company appears to be a solid one for investors to consider, especially with free cash flow being generated now and in the future.
• This prospect has legs if the market starts to surge higher, but it's not the type of firm that will make investors rich.
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WPX Energy (WPX), just like many other oil and gas E&P (exploration and production) firms operating in the US, has had to remain diligent throughout 2020. Between the COVID-19 pandemic and uncertainty surrounding OPEC and its non-OPEC allies adhering to production cuts, the company has had to revise some of its expectations for this year and next. Even so, with these changes, and with other steps taken by management, the firm appears to be in a pretty good position at this time. For long-term investors looking for an attractive prospect in this space, now might be a good time to consider jumping into WPX.

A quality operator

There's no doubt that in the oil and gas market, WPX is a quality player. To see this, we need only look at a few things. For starters, consider the business's expectations for the current fiscal year. In its second-quarter earnings release, management stated that free cash flow for 2020, given current energy pricing, should be around $200 million or more. Add into this the firm's $1.05 billion to $1.15 billion in planned capex, and we end up with operating cash flow of $1.30 billion at the midpoint. So far this year, the business is on a good path to achieving that. In the first half of 2020, operating cash flow totaled $532 million. And that was with a rather painful second quarter. On a TTM (trailing twelve month) basis, the firm has generated $1.16 billion in operating cash flow.

In order for the business to hit $200 million or more in free cash flow, it doesn't need to do all that much. Despite pain so far this year, free cash flow in the first half of 2019 has come out to $162 million. On a TTM basis, the company generated free cash flow of $263 million. This means that achieving only

Analyst’s Disclosure:I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.