MCF: Is this the beginning of a surge in M&A activity?

[dan_s]

HOUSTON, Sept. 27, 2019 (GLOBE NEWSWIRE) -- Contango Oil & Gas Company (NYSE American: MCF) (“Contango” or the “Company”) announced today that it has entered into an asset purchase agreement to acquire the assets of White Star Petroleum LLC and certain affiliates (“White Star”) as a part of the White Star Chapter 11 bankruptcy, 363 sales process.

Press release: https://finance.yahoo.com/news/contango ... 07412.html

Note from John White at Roth Capital
MCF: Large Acquisition; Waiting to Learn Financing Plans

MCF announced an agreement to acquire the assets of White Star Petroleum LLC. MCF will acquire 15,000 BOE per day of production and 20 million BOE of proved developed producing (PDP) reserves and 315,000 net acres in Oklahoma in the STACK play, the general Anadarko Basin and the Cherokee Basin (in far northeast Oklahoma) for a total purchase price of $132.5 million.

We calculate acquisition metrics are $8,833 Flowing BOE per day and $6.63/PDP BOE. It is not clear from the press release the split of the White Star assets between non-conventional (shale) and conventional oil and gas properties. The press release mentions STACK assets are a portion of the assets but does not specify if these are shale assets or merely in the region of the Anadarko Basin referred to as the STACK play.

Total reserves were not disclosed. Compared to predominately shale play metrics the properties are being acquired on a very inexpensive valuation. Our coverage of predominately shale play companies recently traded at a median Flowing BOE per day of $36,084. This leads us to conclude, at least initially, that the assets are mature and primarily conventional oil and gas properties.

Very Large Transaction: Our most recent estimate of MCF production for 2019 is 5,482 BOE per day. Incorporating the figures in the press release from today, together with the figures from the press release announcing the Will Energy Corporation acquisition would imply 2020 production on the order of 21,800 BOE per day.

We await further data on a number of metrics, such as lease operating expenses estimated for the Will Energy Corporation production and the White Star Energy production, total proved reserves for the White Star assets, and most importantly, financing plans for the White Star Energy acquisition.
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MY TAKE: This is a really BIG DEAL for MCF. As John says above, we need more details to model it. I dropped MCF from my Watch List early this year, but this deal puts it back on.