Lonestar has released their year-end reserve report. Below are comments from John White at Roth Capital.
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Our valuation is based on a net asset value (NAV) analysis which produced $10.97 per share which we adjusted higher to $11.00, which is our target price. (Including John's new report, in the last 3 months, 4 ranked analysts set 12-month price targets for LONE that range from $7.50 to $13.00 per share. The average price target among the analysts is $10.44. The $7.50 valuation is dated before Lonestar's 2018 reserve report was released.)
LONE recently released its SEC proved reserves as of 12/31/2018 and the results are, in our view, outstanding. LONE’s 2018 SEC total proved reserves increased 27%, from 73.6 million BOE as of 12/31/2017 to 93.3 million BOE as of year-end 2018. The 23.8 million BOE increase was achieved through a well-balanced program with 11.3 million BOE through acquisitions, 8.3 million BOE through organic drillbit extensions and discoveries, and 4.3 million BOE through positive reserve revisions.
In our opinion, the positive revisions to the 2017 figures reflect favorably on LONE’s booking practices and high quality reservoir performance. The reserve additions were equal to 586% of LONE's 2018 production.
In our view, the 2018 proved reserves results speak very positively on the subject of valuation. LONE's reserves in the Proved Developed category increased 47% to 26.8 million BOE and the PV-10% associated with this lower risk category of reserves was $465 million using SEC guidelines. This figure is within hailing distance of LONE’s enterprise value of $502 million as of the close on 2/8/2019.
Continuing on the subject of valuation, LONE calculated proved reserves at an alternate price deck of $55.00/bbl for WTI crude oil and $2.75/MMBtu for Henry Hub natural gas. Using this price deck, the PV-10% associated with LONE's total Proved reserves was $782.5 million and the PV-10 associated with Proved and Probable reserves was $919.9 million.
We have updated our 4Q 2018 estimates using actual 4Q 2018 oil and gas prices. Our estimates move lower from EPS/CFPS/EBITDA of to $0.10/$1.14/$36.5 million to $0.03/$1.13/$36.8 million
To better reflect the current commodity price environment, we have lowered our 2019 WTI crude oil price estimate from $62.50/bbl to $51.75/bbl and our 2020 estimate moves from $65.00/bbl to $55.00/bbl. Our 2019 Henry Hub natural gas price forecast moves from $3.00/MMBtu to $2.80/MMBtu. Our 2020 Henry Hub estimate is unchanged at $2.70/MMBtu.
While our lower oil and gas price deck has a negative impact on our NAV this is offset by LONE’s increased proved reserves and our price target is unchanged at $11.00.
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My valuation of LONE is $16.00/share.
> Lonestar sells 100% of their oil at a ~$5/bbl premium to WTI because they get LLS prices.
> Based on my forecast model, Lonestar should generate over $4.00 operating cash flow per share in 2019. (note that John White's operated CFPS estimate for Q4 2018 is $1.14/share.)
Lonestar Resources (LONE) Update - Feb 11
Lonestar Resources (LONE) Update - Feb 11
Last edited by dan_s on Mon Feb 11, 2019 11:13 am, edited 1 time in total.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Lonestar Resources (LONE) Update - Feb 11
From the company's press release:
Lonestar's proved reserves at December 31, 2018 are comprised of 53.4 million barrels of crude oil and condensate, 19.9 million barrels of natural gas liquids ("NGL's"), and 120.2 billion cubic feet of natural gas. By energy content, Lonestar's proved reserves are weighted 79% to crude oil, condensate and NGL's.
•In 2018, Lonestar added a total of 23.8 MMBOE, which consisted of 11.3 MMBOE through acquisitions, 8.3 MMBOE through extensions and discoveries, and 4.3 MMBOE through positive reserve revisions. These reserve additions were equivalent to 586% of Lonestar's 2018 production.
•Lonestar's Proved Developed reserves increased 47% to 26.8 MMBOE and the PV-10 associated with its Proved Developed reserves increased 81% to $464.9 million using SEC guidelines.
•Lonestar's capital expenditures totaled $209.9 million for the year ended December 31, 2018. Lonestar's all-sources finding and development costs were $8.80 per BOE. Drillbit-only finding and developing costs averaged $12.58 per BOE. < This is outstanding!.
•Including 2018 results, Lonestar's five-year reserves replacement ratio has been 716% and the five-year all-sources F&D cost averages $8.94 per BOE.
•In 2018, Lonestar's Proved & Probable reserves increased 31% to 121.5 MMBOE, which is comprised of 67.4 million barrels of crude oil and condensate, 27.0 million barrels of natural gas liquids, and 162.7 billion cubic feet of natural gas. Using SEC guidelines, PV-10 for Proved & Probable reserves exceeds $1.3 billion. < $52/share.
•Lonestar's Proved & Probable reserves included 261 drilling locations which were assigned reserves by the Company's independent petroleum engineers, equating to approximately 15 years of drilling activity at Lonestar's current rate of drilling.
Lonestar has also calculated reserves information at an alternate price deck of $55.00/bbl for West Texas Intermediate crude oil and $2.75/MMBTU for Henry Hub natural gas ("$55 Flat Price Deck"), which closely mirrors current forward benchmark prices. On this basis, the PV-10 associated with Lonestar's Proved reserves was $782.5 million and the PV-10 associated with the Company's Proved & Probable reserves was $919.9 million. < $36.80/share.
Lonestar's Chief Executive Officer, Frank D. Bracken, III commented, "2018 was another year of tremendous growth for Lonestar, coming from a balanced program of drilling and acquisitions. We extended our track-record of low-cost reserve growth, registering exceptional all-sources finding and development costs of $8.80 per BOE while increasing our Proved reserves by 27%. This reserve growth, which was prudently financed, positions Lonestar to significantly increase shareholder value in 2019 and beyond."
Bracken added, "At Lonestar, our objective is to deliver demonstrable growth in the value of our reserves on a per-share basis, while continually improving our balance sheet and financial flexibility. In 2018, we have delivered on that objective again. Our internal value benchmark, which is $55 Flat Price Deck PV-10, net of debt, increased 20% to $8.89 per fully diluted share based on Proved reserves and increased 22% to $12.33 per fully diluted share based on Proved & Probable reserves. I believe our growth in per-share value is even more impactful when we consider the fact that in the same time period, Lonestar reduced its Debt/EBITDAX ratio from 3.6x to 2.6x at year-end 2018."
Lonestar's year-end proved reserves and PV-10 by region were determined by the Company's independent petroleum engineers, W.D. Von Gonten & Co. Petroleum Engineers. Based on rules of the U.S. Securities and Exchange Commission, for the year ended December 31, 2018, Lonestar's proved reserves were estimated using the 12-month average price calculated as the unweighted arithmetic average of the spot price on the first day of each month preceding the 12 months prior to the end of the reporting period. This methodology resulted in an average oil price of $65.56 per barrel and an average natural gas price of $3.10 per million British Thermal Units ("MMBTU"), an increase of 28% for crude oil and an increase of 5% for natural gas, as compared to an average of oil price of $51.34 per barrel and an average natural gas price of $2.96 per MMBTU used to estimate Lonestar's proved reserves for the year ended December 31, 2017.
Lonestar's proved reserves at December 31, 2018 are comprised of 53.4 million barrels of crude oil and condensate, 19.9 million barrels of natural gas liquids ("NGL's"), and 120.2 billion cubic feet of natural gas. By energy content, Lonestar's proved reserves are weighted 79% to crude oil, condensate and NGL's.
•In 2018, Lonestar added a total of 23.8 MMBOE, which consisted of 11.3 MMBOE through acquisitions, 8.3 MMBOE through extensions and discoveries, and 4.3 MMBOE through positive reserve revisions. These reserve additions were equivalent to 586% of Lonestar's 2018 production.
•Lonestar's Proved Developed reserves increased 47% to 26.8 MMBOE and the PV-10 associated with its Proved Developed reserves increased 81% to $464.9 million using SEC guidelines.
•Lonestar's capital expenditures totaled $209.9 million for the year ended December 31, 2018. Lonestar's all-sources finding and development costs were $8.80 per BOE. Drillbit-only finding and developing costs averaged $12.58 per BOE. < This is outstanding!.
•Including 2018 results, Lonestar's five-year reserves replacement ratio has been 716% and the five-year all-sources F&D cost averages $8.94 per BOE.
•In 2018, Lonestar's Proved & Probable reserves increased 31% to 121.5 MMBOE, which is comprised of 67.4 million barrels of crude oil and condensate, 27.0 million barrels of natural gas liquids, and 162.7 billion cubic feet of natural gas. Using SEC guidelines, PV-10 for Proved & Probable reserves exceeds $1.3 billion. < $52/share.
•Lonestar's Proved & Probable reserves included 261 drilling locations which were assigned reserves by the Company's independent petroleum engineers, equating to approximately 15 years of drilling activity at Lonestar's current rate of drilling.
Lonestar has also calculated reserves information at an alternate price deck of $55.00/bbl for West Texas Intermediate crude oil and $2.75/MMBTU for Henry Hub natural gas ("$55 Flat Price Deck"), which closely mirrors current forward benchmark prices. On this basis, the PV-10 associated with Lonestar's Proved reserves was $782.5 million and the PV-10 associated with the Company's Proved & Probable reserves was $919.9 million. < $36.80/share.
Lonestar's Chief Executive Officer, Frank D. Bracken, III commented, "2018 was another year of tremendous growth for Lonestar, coming from a balanced program of drilling and acquisitions. We extended our track-record of low-cost reserve growth, registering exceptional all-sources finding and development costs of $8.80 per BOE while increasing our Proved reserves by 27%. This reserve growth, which was prudently financed, positions Lonestar to significantly increase shareholder value in 2019 and beyond."
Bracken added, "At Lonestar, our objective is to deliver demonstrable growth in the value of our reserves on a per-share basis, while continually improving our balance sheet and financial flexibility. In 2018, we have delivered on that objective again. Our internal value benchmark, which is $55 Flat Price Deck PV-10, net of debt, increased 20% to $8.89 per fully diluted share based on Proved reserves and increased 22% to $12.33 per fully diluted share based on Proved & Probable reserves. I believe our growth in per-share value is even more impactful when we consider the fact that in the same time period, Lonestar reduced its Debt/EBITDAX ratio from 3.6x to 2.6x at year-end 2018."
Lonestar's year-end proved reserves and PV-10 by region were determined by the Company's independent petroleum engineers, W.D. Von Gonten & Co. Petroleum Engineers. Based on rules of the U.S. Securities and Exchange Commission, for the year ended December 31, 2018, Lonestar's proved reserves were estimated using the 12-month average price calculated as the unweighted arithmetic average of the spot price on the first day of each month preceding the 12 months prior to the end of the reporting period. This methodology resulted in an average oil price of $65.56 per barrel and an average natural gas price of $3.10 per million British Thermal Units ("MMBTU"), an increase of 28% for crude oil and an increase of 5% for natural gas, as compared to an average of oil price of $51.34 per barrel and an average natural gas price of $2.96 per MMBTU used to estimate Lonestar's proved reserves for the year ended December 31, 2017.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Lonestar Resources (LONE) Update - Feb 11
For more details on the reserve report, go to https://lonestarresources.com/
Lonestar will be hosting our Houston luncheon at The Hess Club on Wednesday, March 20th.
Lonestar will be hosting our Houston luncheon at The Hess Club on Wednesday, March 20th.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Lonestar Resources (LONE) Update - Feb 11
I have updated my forecast/valuation model for LONE and posted it to the EPG website.
My forecasts:
Year: EPS/CFPS
Q4 2018: $0.08/$1.00
FY 2019: $0.49/$4.00 < 25% year-over-year production growth based on the low end of Lonestar's guidance from 11/19/2018
FY 2020: $1.06/$4.99
My valuation of LONE is $16.00/share bases on 4X 2019 operating CFPS.
My forecasts:
Year: EPS/CFPS
Q4 2018: $0.08/$1.00
FY 2019: $0.49/$4.00 < 25% year-over-year production growth based on the low end of Lonestar's guidance from 11/19/2018
FY 2020: $1.06/$4.99
My valuation of LONE is $16.00/share bases on 4X 2019 operating CFPS.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Lonestar Resources (LONE) Update - Feb 11
Seems like “all sources finding and development costs” would be more than drill-bit only find and development costs not less. Do you know what they are incuding in all sources?
Re: Lonestar Resources (LONE) Update - Feb 11
"All source" includes acquisitions, which explains why it is higher.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group