Monday, October 14, 2019

Abraxas And Whiting Talking-- October 14, 2019

Updates

October 15, 2019: in the following update, the reader is correct -- market cap for Abraxas is $65 million; the earlier figures reported yesterday were from corporate presentations a year ago. Share prices were $2.20/share a year ago according to Yahoo!Finance but today are trading at 38 cents.  38/2.20 = 17% x $400 million (then) = $68 million (today) so the "numbers all work out."

October 15, 2019: remember, this is not an investment site. We follow the market to give us a better understanding of what is going on in the Bakken. With that caveat, here's a pretty good summary following the announcement (see first comment):
Abraxas market cap is $65 million as of today... This is similar to the QEP-planted rumor reported by Reuters about Whiting or Blackstone buying them. I don't see Whiting wanting the TX assets (which aren't worth $30k per acre, probably half that or less due to location and quality).

Abraxas has $200 million in debt, owns their own rig which they can't put to work, and generally has over-drilled all their acreage in North Dakota. Also, they had to halt their Texas drilling due to prices (gas sells for next to nothing where they are located and the wells don't produce enough oil, uneconomic). Also, they already sold all of their non-op. Whiting might tough (sic - touch) their Bakken assets at the right price but the company is structurally bankrupt at this point. Most likely option is going to be bankruptcy after this rumor is proven false. The playbook for oil and gas companies, go bankrupt and come back out with debt cut in half. It's a shame. They won't fire sale the Bakken because their other assets aren't worth much. Their best option is to file with a prepackaged BK plan. 
Original Post

From Reuters today (a huge "thank you" to a reader for alerting me to this story):
Whiting Petroleum Corp, an oil and gas producer with operations in North Dakota and Colorado, is in deal talks with San Antonio-based Abraxas Petroleum Corp.
Disclaimer: this is not an investment site.  Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here. 

Over at "Bakken Operators," this on Abraxas:

Abraxas
  • January, 2019, corporate presentation; looking to sell Bakken assets; EURs: MB, around 900K boe; Three Forks, around 800 boe;
  • Filloon on AXAS, May 8, 2017; 
  • November 6, 2013: sells 2,563 non-producing Bakken acres in its Fairview Prospect, Montana (Richland County) for $10.9 million ($4,250/acre)
  • August, 2013: sees 4,600 - 4,800 boepd December, 2013, exit rate;
  • sells 13,500 net acres; non-operated assets; to NRP; $35.5 million -- June 17, 2013
  • 4Q12e: 4,300 - 4,500 boepd
  • Operations in both the Bakken and Eagle Ford
  • 21,000 net acres in the Bakken (ND + MT); 20,853, SeekingAlpha, 2011
  • BEXP presentation says Abraxas has 20,853 net acres
  • Nesson: 2,600 net acres; nice acreage
  • Carter: 3,200 net acres; northeast of best Bakken; +/- value
  • North Fork: 3,200 net acres; nice acreage
  • Elkhorn Ranch: 2000 net acres; southwest North Dakota
  • Elm Coulee: 440 net acres; where it all started in 2000
  • Harding: 5,800 net acres; Williston area; nice area
  • Sheridan: 3,000 net acres; Montana northwest of Williston (quality?)
Note that first bullet, January, 2019.

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Background

Corporate presentation, April, 2018, still available on line.

Summary of the Abraxas corporation, January, 2019, available here. From that summary:
Also, here at SeekingAlpha.
Abraxas is budgeting $95 million for capital expenditures in 2019.
This is expected to result in 11,000 BOEPD in average production during the year and perhaps slightly positive cash flow at mid-$50s WTI oil.
Abraxas is looking at options for its Bakken assets, which have limited inventory remaining, but currently provide the majority of the company's production and cash flow.
The decision on what it does with the Bakken assets will have a significant impact on Abraxas's estimated value.
4,000 acres in the Bakken and it provides the company's production and cash flow. I think that simply incredible. I guess I find it even more incredible the company is considering selling their Bakken assets.
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Back Of The Envelope: Abraxas

Some are Abraxas' figures; others are mine:
  • market cap: $400 million
  • Permian: 10,000 net acres x $30,000/acre = $300 million
  • Bakken: 4,000 net acres x $7,500/are = $30 million
  • acres: $330 million
  • production: 
    • 10,000 boeped = $400K / day
    • annual oil & gas revenue: $400K x 365 = $150 million / year
  • CAPEX: $140 million 
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Back of the Envelope: Whiting

Some are Whiting's figures; others are mine:
  • market cap: $660 million
  • revenue: $1.9 billion
  • operating cash: $1 billion
  • total debt: $3 billion
  • outstanding shares: 90 million
  • 90 million x $7 = $600 million
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Idle Chatter

In progress.

WLL: shares were down 2.4% today (on a generally "down" day for the market) but up a percent in after-hours trading.

If interested in investing in WLL at this time, there are two periods in which to invest:
  • now, prior to any announcement;
  • then, after the announcement;
This post is IN PROGRESS.

Disclaimer: simply idle chatter. No thoughts on this as a business deal, one way or the other.

Market cap:
  • Whiting and Abraxas in same ballpark: $400 million to $600 million
If this is an all-stock deal, as reported by Reuters, it doesn't take a rocket scientist to estimate Whiting's dilution.

3 comments:

  1. Hey just a side note. Abraxas market cap is $65 million as of today... This is similar to the QEP planted rumor reported by Reuters about Whiting or Blackstone buying them. I don't see Whiting wanting the TX assets (which aren't worth $30k per acre, probably half that or less due to location and quality).

    Abraxas has $200 million in debt, owns their own rig which they can't put to work, and generally has overdrilled all their acreage in North Dakota. Also, they had to halt their Texas drilling due to prices (gas sells for next to nothing where they are located and the wells don't produce enough oil, uneconomic). Also, they already sold all of their non-op. Whiting might tough their Bakken assets at the right price but the company is structurally bankrupt at this point. Most likely option is going to be bankruptcy after this rumor is proven false. The playbook for oil and gas companies, go bankrupt and come back out with debt cut in half. It's a shame. They won't fire sale the Bakken because their other assets aren't worth much. Their best option is to file with a prepackaged BK plan.

    ReplyDelete
    Replies
    1. Can't disagree; I'm seeing the same thing but I don't follow the Permian close enough to know about quality of location.

      Delete
    2. Comment moved to body of blog for wider audience.

      Delete