Trying To Get A Handle On $3.1 Billion for 45,500 Net Acres -- Even If It Is The Eagle Ford; EOG 1Q14 Earnings Conference Call

Updates

May 8, 2014: a reader points out something critical that I missed when trying to sort out the valuation for Halcon:

Regarding your post about HK being valued at $2.2billion, remember to keep in mind that's just the equity valuation. They have another ~$3.2b in net debt (very little cash) giving it an enterprise value of roughly $5.4b. 

That's an excellent point; a huge oversight on my part. A "huge thank you" to the reader. I used to "know" that about enterprise value and then forgot. Use it or lose it, I guess; that's why I post -- to help me learn; to help put the Bakken in perspective. 
 

Original Post

 
Reported earlier, Encana paid $3.1 billion for this in Eagle Ford --

The deal will give Encana 45,500 net acres in Karnes, Wilson and Atascosa counties in south Texas. The properties produced the equivalent of about 53,000 barrels of oil per day in the first quarter.

For comparison purposes, Halcon produces an average of 36,622 barrels of oil equivalent per day, in the Bakken (more overall, see below). Halcon has 142,000 net acres in the Bakken, and much more elsewhere, see below. Halcon's market capitalization is $2.2 billion.

One can argue that the difference between 37,000 boepd and 53,000 boepd is significant or not significant (I tend to argue the latter), but the difference between 45,000 net acres of prime real estate is vastly different than 142,000 net acres. 

When I see something that seems very strange or unusual, I can only assume I made an error somewhere but that's the data I'm working with. Some say the Eagle Ford is better than the Bakken on a "per acre" valuation but $3.1 billion for 45,500 net acres vs $2.2 billion for 142,000 net acres seems to jump out at me.

Oh, by the way, the $2.2 billion market cap that Halcon has also includes 307,000 acres in the Tuscaloosa Marine Shale (Louisiana) and another 100,000 net acres in El Halcon, in the Eagle Ford. Yes, this all does not make sense. I must be missing something. Encana buys 45,500 net acres for $3 billion and Halcon with over 500,000 acres in some pretty good shale including the Bakken, the Eagle Ford, and the Tuscaloosa Marine and is valued at $2.2 billion. Again, I can only assume I'm missing something.

Oh, back to that 53,000 boepd for the new Encana acreage vs 37,000 boepd for Halcon -- overall, Halcon has over 40,000 boepd. The delta between 53 and 40 narrows.

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EOG's 1Q14 Earnings Call -- Transcript
SeekingAlpha

Operations In The DJ Basin (Colorado), Powder River Basin (Wyoming)

• adding 735 high-rate-of-return net drilling locations in the sweet spots of four plays
• estimated reserve potential of 400 net million boe
• ten solid years of drilling inventories in these four plays
• two of these four plays in the DJ Basin
• two plays in the Powder River Basin
• EURs of 850,000

Eagle Ford

• on track to drill 520 net wells this year
• 26 rigs
• a number of Eagle Ford wells have IP rates in excess of 4,000 bopd
• largest growth asset with the high after-tax rates of return
• 564,000 net acres; most leases held by production
• will generate a free cash flow this year and every year through 2024
• ten years of growth before EOG even begins to see production level out

The Bakken

• this past year, increased drilling density from two to four wells/spacing unit
• the majority of wells in Core and Antelope Extension were based on 1,300 feet between wells
• now testing tighter spacing, down to 700 feet
• six rigs; plan to add a seventh this summer (2014)
• EOG has not determined years of inventory; still sorting out spacing

Leonard Shale

• testing 32-acre spacing across different zones

Oil

• worldwide analysis: bullish on oil

Natural gas

• pricing to remain between $4.50 and $5.00
• caveat: operators remain disciplined; don't ramp up drilling activity

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Politics

Was this the 2014 "malaise speech"?

Acknowledging that despite a list of accomplishments that there is still a “disquiet around the country” as well as “an anxiety, and a sense a frustration,” Obama said that “the challenges out there remain daunting and we have a Washington that’s not working.” [Comment: as far as I can tell, only one "accomplishment: ObamaCare.]

“Those who don’t believe government can do anything are empowered, gridlock reigns, and we got this downward spiral of even more cynicism and more dysfunction, and we have to break out of that cycle and that’s what this election is all about,” Obama said, according to a pool report, in remarks that lasted about 15 minutes. [Comment: exactly who are empowered?]

He added, “Because I’m optimistic about America’s prospects…don’t buy this notion purported here that that somehow America is on a downward trajectory. [Comment: Carteresque?]

By every indicator we are better positioned than any country on earth to succeed in this knowledge economy in the 21st century. [Comment: in addition, there's an energy revolution in the US that the president has never acknowledged.]

But what is absolutely true is that if we don’t make good choices we could decline, and we’re not going to make good choices unless we break out of this cycle in which dysfunction breeds cynicism, and we have to break out of it.” [Any specifics? Which good choices?]

A 2014 "malaise speech" or an emperor with no clothes?

I wonder what radio talk shows the president has been listening to because I don't think I've read any polls on "dysfunction breeding cynicism" in the US. The only place I hear that kind of talk is on conservative talk radio. I assume he is getting some internal polling numbers.