Thursday, April 4, 2013

For Archival Purposes Only; Compare To Bakken -- Midstates Petroleum to Buy Producing Properties in The Anadarko Basin

Rigzone is reporting:
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
Key statistics from Yahoo!Financial (data lags actual) (many figures rounded)
  • 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
Compare with TPLM, a Bakken-centric company
  • 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
Disclaimer: this is not an investment site. Do not make any investment decisions based on what you read here or what you think you read here. I post these comparisons to get a feeling of the various companies. In this case, I have a pretty good feeling for TPLM but had not followed MPO. This gave me a chance to compare the two, and they may or may not be a bit comparable in the eyes of others. In addition, acquisitions give me a sense for what mineral acreage is selling for these days. But this is definitely not an investment analysis. I'm just trying to keep up with what's going on in the Bakken. 

From Investopedia:

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.

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