Monday, October 1, 2012

Zeits on XOM-Denbury Deal

Link here to

Don alerted the story to me (thank you).  It will be interesting to see if the writer picked up on the single data point that explains how the deal got started -- as told to me by a reader.

Data points for Part I of the series follows.

Introduction and premise

  • the writer notes that the DNR assets bought by XOM are almost identical to those of KOG
  • KOG, if bought out, would command a 30% premium
  • the delta: KOG valued twice that of DNR -- why?

In Part I the writer compares operating performance of the two portfolios in the Bakken (DNR and KOG)

  • location: KOG and DNR incredibly similar; perhaps the sole significant difference is that DNR offered greater exposure in the Charlson area (a huge field)
  • acreage: similar; the deal -- 196,000 DNR acres; my database shows KOG has 155,00 net acres
  • hbp: both companies either hold all acreage or will hold all acreage by production
  • operatorship: exact details unknown, but DNR probably slight advantage
  • developed reserves: KOG producing 13K boepd with 28 million boe of proved developed producing reserves; DNR producing 15K boepd with 28 million boe pdpr
  • performance: KOG wells 15% - 20% better than DNR wells

With regard to the performance, this is the nut:
It is difficult to determine if the difference in well results is attributable to KOG having higher quality acreage, or to more effective completion techniques. If the latter were true and could be demonstrated, DNR's acreage may be just as attractive from an M&A acquirer's point of view as KOG's. 
Part II will discuss the financial aspects of the XOM-DRN deal.

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