Midstates Petroleum Co. agreed to buy producing properties as well as developed and undeveloped acreage in the Anadarko Basin in Texas and Oklahoma for $620 million in cash in a deal that expands the oil oil producer's resource potential and footprint.
Shares tumbled 5% to $7.02 in recent trading. The stock has dropped 7.8% in the past three months.
The deal adds about 36.4 million barrels of oil equivalent proved reserves that are 45% oil and 21% natural gas liquids, of which 34% are proved developed producing. It increases net current daily production by about 8,000 Boe per day and enhances drilling inventory with more than 700 repeatable horizontal drilling opportunities.
The transaction also expands Midstates' acreage position with about 140,000 net acres with multiple objectives and adds roughly 280 gross producing wells that are more than 80% operated.Quick back-of-the-envelope: $620 million / 140,000 net acres = $4,400/acre, much of which is producing.
Some notes from the company's presentation on this acquisition:
- short laterals; relatively shallow; cost $3 million/well
- 50% oil; 25% NGL; 35% gas (does not add to 100 because of each product provided; but at most, oil was estimated to be 50%; range was 45 to 50%; I believe the Bakken exceeds 90% for oil)
- sand fracks; 15 to 17 stages
- average finding and development: $18 to $24 / boe
- recent share price: $6.67
- p/e: N/A
- forward p/e: 20
- market cap: $500 million
- total cash: $20 million
- total debt: $700 million (before this acquisition)
- operating cash flow: $140 million (before this acquisition)
- levered free cash: -$600 million
- recent share price: $6.20
- p/e: N/A
- forward p/e: 11
- market cap: $275 million
- total cash: $45 million
- total debt: $60 million
- operating cash flow: -$11 million
- levered free cash: -$17 million
Definition of 'Levered Free Cash Flow': The amount of cash that is left over for stockholders after interest on company debt has been paid out. Levered free cash flow plays an integral role in a business because cash can be used to pay dividends, pay for expansion or take on more debt for growth opportunities.
Investopedia Says Investopedia explains 'Levered Free Cash Flow': Levered free cash flows are important to a company because it signals what sort of cash position it is in after interest on its debt has been paid off. For example, if a company generates large quantities of cash, most of which has to be used to pay off interest on debt, the cash generated might not be enough to sustain proper future operations.