Earthstone Energy (ESTE) Update - June 14

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dan_s
Posts: 34463
Joined: Fri Apr 23, 2010 8:22 am

Earthstone Energy (ESTE) Update - June 14

Post by dan_s »

My updated forecast/valuation model for Earthstone will be posted to the EPG website this afternoon. My valuation increases by $2 to $16/share.

Earthstone Energy Announces Eagle Ford Bolt-On Acquisitions of 1,150 Boepd
06/14/2021

Company Updates Tracker Acquisition and Highlights Environmental/Safety Disclosures

THE WOODLANDS, Texas, June 14, 2021 /PRNewswire/ -- Earthstone Energy, Inc. (NYSE: ESTE) ("Earthstone" or the "Company") today announced that it has acquired working interests in assets it operates located in southern Gonzales County, Texas (the "Eagle Ford Acquisitions") from four separate sellers. The aggregate purchase price of the Eagle Ford Acquisitions was approximately $48 million in cash. Earthstone funded the Eagle Ford Acquisitions with cash on hand and borrowings under its senior secured revolving credit facility. The effective date of the Eagle Ford Acquisitions was April 1, 2021. The largest of the acquisition components, comprised of working interests owned by two affiliates of Titanium Exploration Partners, LLC, constituted the majority of the total consideration.

Asset highlights:

Recent net production of ~1,150 Boepd (~89% oil)
$67 million PDP PV-10 as of 4/1/21 with associated reserves of approximately 3.4 MMBoe
Low-cost, high margin and lower declining production in Earthstone operated assets
Increases Earthstone working interest in subject assets from ~34% to ~96%

Impact on Earthstone:

Purchase price implies PV-22 discount rate on PDP
Oil-weighted production and cash flow contribution to existing Earthstone asset base
Minimal impact on pro forma year-end 2021 leverage with Earthstone targeting sub-1.25x Debt/Adjusted EBITDAX
Expected second quarter 2021 production impact of ~400 Boepd (~89% oil)
Expected second half of 2021 production impact of ~1,000 Boepd (~89% oil)

Management Comments

Mr. Robert J. Anderson, President and CEO of Earthstone, commented, "The Eagle Ford Acquisitions, following the announcement of the proposed Tracker acquisition in April 2021 and the closing of the IRM acquisition in January 2021, are yet another step in our ongoing consolidation strategy. We paid an attractive price for these producing assets which we already operate and they will add 1,150 Boepd of production with a lower decline profile compared to our current aggregate corporate decline profile. While not as significant in size as the previously announced acquisitions, the Eagle Ford Acquisitions will increase oil production and positively impact our overall cash margins. We intend to continue seeking other value-enhancing transactions that would increase our operational and corporate cost efficiencies while maintaining financial discipline, ultimately benefitting our shareholders via stock price appreciation."

Approvals

The Eagle Ford Acquisitions were unanimously approved by Earthstone's Board of Directors. Because one of the four sellers is owned by an affiliate of EnCap Investments L.P. ("EnCap"), a significant holder of Earthstone common stock and represented on the Board of Directors, the Audit Committee of the Board of Directors of Earthstone independently reviewed and approved the related-party acquisition. After participating in a competitive sales process, the Company acquired the assets for $8.2 million from that entity.

Tracker Acquisition Update

Earthstone filed a definitive proxy statement on June 9, 2021 for its 2021 annual meeting of stockholders (the "Annual Meeting") to be held on July 20, 2021, at 9:00 a.m. Central Time. One of the proposals to be voted on at the Annual Meeting relates to the issuance of shares of the Company's Class A common stock for the acquisition of assets located in the Midland Basin from Tracker Resource Development III, LLC and an affiliate, and from affiliates of Sequel Energy Group LLC (collectively, the "Tracker Acquisition"). The definitive proxy statement related to the Annual Meeting was mailed to stockholders beginning on June 9, 2021. Earthstone has engaged Advantage Proxy, Inc. as its proxy solicitor in connection with the Annual Meeting. Contingent upon receiving stockholder approval of the share issuance related to the Tracker Acquisition at the Annual Meeting, Earthstone expects to close on the Tracker Acquisition shortly thereafter.

Environmental and Safety Data Disclosure Highlights

Consistent with Earthstone's commitment to environmental stewardship and safety, Earthstone has disclosed key data on its emissions, flaring, land impact and safety for 2019 and 2020, which is available under the "Sustainability" section of the Company's website. Key highlights include:

Greenhouse gas emissions intensity of 12.4 mT CO2e / MBoe is 29% below Permian peers
Flaring intensity of 2.17% (gas flared / gas produced) is 45% below Permian peers
Zero oil spills in 2019 and 2020
Zero employee reportable safety incidents in 2019 and 2020

About Earthstone Energy, Inc.

Earthstone Energy, Inc. is a growth-oriented, independent energy company engaged in the development and operation of oil and natural gas properties. Its primary assets are located in the Midland Basin of west Texas and the Eagle Ford Trend of south Texas. Earthstone is listed on the New York Stock Exchange under the symbol "ESTE." For more information, visit the Company's website at www.earthstoneenergy.com.
Dan Steffens
Energy Prospectus Group
Fraser921
Posts: 2953
Joined: Mon Mar 22, 2021 11:48 am

Re: Earthstone Energy (ESTE) Update - June 14

Post by Fraser921 »

Up 11. 0 % today, wow

Dan, everytime you mention a name it goes up 10 %
dan_s
Posts: 34463
Joined: Fri Apr 23, 2010 8:22 am

Re: Earthstone Energy (ESTE) Update - June 14

Post by dan_s »

Trust me. Not every time.

These stocks were so grossly oversold that this year it is easy. You pay me the Big Bucks to find them before the Wall Street Gang does.
Dan Steffens
Energy Prospectus Group
mrbill
Posts: 77
Joined: Fri May 07, 2010 3:58 pm

Re: Earthstone Energy (ESTE) Update - June 14

Post by mrbill »

Hello Dan, your evaluations on SM, AR, and SBOW have been wonderful. Do you have one more "gem" you would
recommend?
dan_s
Posts: 34463
Joined: Fri Apr 23, 2010 8:22 am

Re: Earthstone Energy (ESTE) Update - June 14

Post by dan_s »

Sitting here for my review are NOC, SOI, OMP and PAA.

If you think oil will stay over $70/bbl, the two Canadian Juniors (Hemisphere Energy (HMENF) and InPlay (IPOOF) ) should both be triples for us by this time next year. SBOW. PVAC and REI should be doubles for us.
Dan Steffens
Energy Prospectus Group
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