Falcon Minerals (FLMN) Valuation Update - May 20

[dan_s]

At the time of this post FLMN was trading for $6.71. It is a C-Corp. in our High Yield Income Portfolio.

My updated valuation is $9.50.

TipRanks: Since April 7, four energy sector analysts have adjusted their price targets for FLMN to $7.00 to $9.60.

Desert Peak (a private minerals company that is much larger) will be merging into and taking control of Falcon Minerals. I expect them to pay dividends equal to approximately 70% of their operating cash flow. Based on my Proforma Forecast for 2022, they should pay an annualized dividend of $0.83. That is a yield of 12.4% based on today's share price. Important: None of Falcon's production is hedged, so their variable dividend could go higher if oil, gas and NGL prices are higher than what I used in the model.

As a standalone company, FLMN paid a Q1 2022 dividend of $0.18/share.

My updated forecast/valuation has been posted to the EPG website.

[Fraser921]

I like it!

[ajootian]

Dan, as I understand the merger transaction, the 235M shares that are being issued will be added to, vs. in place of, the shares that FLMN currently as out.

Also, on your projection, I am expecting the merged company to generate a lot higher lease bonus fees than what you are projecting.

[dan_s]

One of our MBAs is working on the updated profile for Falcon this week. I will be taking a hard look at my forecast model during the review process.