Monday, July 15, 2019

Huge Thanks To Z4 For The Alert; Merger In The Permian -- July 15, 2019

From Rigzone, July 15, 2019, another Permian merger:
  • Callon Petroleum to acquire Carrizo Oil & Gas
  • all-stock transaction
  • $3.2 billion
  • 200,000 net acres in the Permian Basin and Eagle Ford shale
  • more than 90,000 net acres in the Delaware Basin
  • 2,500 total gross horizontal locations
Net acres valued at $16,000/acre (of course, this includes current production).

From the archives, JAG:
  • 75,000 net acres
  • x $16,000/acre = $1.2 billion
  • JAG's market cap today: $1.826 billion
  • or, $1.83 billion / 75,000 = $24,000/net acre
Disclaimer: this is not an investment site. Do not make any investment, financial, job, travel, career, or relationship decisions based on what you read here or what you think you might have read here. 

NOG (link here):
  • 170,000 net acres (?)
  • market cap today: $735 million 
  • $4,000 / net acre


  1. I approve of this in the same manner and for the same reasons that I approved of the Apache Anadarko merger (which did not come off). The sole reason is that the two C companies (as with the two A companies) were sort of boring (don't have personalities like CLR or EOG or PXD) and had similar names. Thus if they combine, it is easier to keep track of them.

    This is similar to my horse-racing theory. Bet on the ones with the cool names. Since the odds should reflect a market estimate anyways, there's no point in going for favorites for low payoff or longshots for big (but with low chance). Similarly, there is no point in researching the horse with the Form or the like, since others will have done so and efficient markets will have moved the odds. Thus at least when you are cheering, it is for a cool name.

    1. Pretty funny. I bet that's exactly how 90% of those who bet on the horses make their bets...based on the names of the horses.

  2. The press release is a little silent on the debt/equity. Total transaction is 3.2 B. But it's about 1.2 B for the CRZO stock (paid in CPE stock) and about 2 B to pay off the CRZO debt (or transfer it).

    For the acreage, makes more sense to use total entitity value (3.2 B). That comes out to 16,000 per acre (3.2B/200,000). Of course, within that, the Delaware may be worth more and EF less. These companies often have some core that's worth a lot and fringe that's goat pasture.

    1. Thank you. Much appreciated.

    2. I forgot to account for the "flowing production". Will get back to you.

      Deducting flowing production at 35,000/bo, you get a little under 9000/acre. Still not bad considering that there is some EF acres in there and that (I expect) some of the Permian acreage is non-core.

      Really, I think CPE was a dog from being over-levered (how they bought the acres), not from having bad land.

      TEV bopd $/bopd acres $/acre
      $3,200,000,000 40,700 $35,000 200,000 $8,878

    3. You are correct about "flowing production." I generally do not include it for any number of reasons. But, yes, including "flowing production," will lower the cost/net acre.

      As far as CPE (Callon Petroleum) being over-leveraged, I doubt they were the only ones. The Permian was expensive to buy into.

  3. If you include the flowing gas (probably should, but use 15,000/bgpd), than it's actually about $6,000/acre.

    1. Wow, if you can get it down to %6,000/acre, that's an incredible deal for the buyer, based on what little I know.

    2. You can't tell that, really. Most of the acres are in the EF and low value. Even in the Delaware, it's not all core.

    3. Yeah, you're probably right. Time will tell. But getting from $24,000/net care to $6,000/net acre is a lot more meaningful.

    4. Belay my last. It's more like $10,000 per acre. Acquired company was 122,000 acres, not 200,000. Latter number is the total. Sorry for the stream of consciousness. But at least I taught myself how to do these acreage calcs.

    5. That's better. LOL. $6,000 did seem a bit low for the Permian. That's why I pretty much just keep to "full price" of the announced deal and the net acres involved.