Earthstone Energy Announces Northern Midland Basin Asset Acquisition for $950 Million and Preliminary 2019 Capital Expenditure Program and Operational Guidance
Midland Basin Footprint to Increase by 69% and Approximately Double Both Current Production and Gross Operated Midland Basin Locations
Net production of ~11,200 Boe/d (83% oil) for the month of September 2018 predominantly from 29 gross operated (27 net) and 57 gross non-operated (6.2 net) horizontal Lower Spraberry and Wolfcamp A wells
Earthstone Energy, Inc. (ESTE) (“Earthstone”) today announced that it has entered into an agreement (the “Agreement”) with Sabalo Holdings, LLC (“Sabalo Holdings”), whereby Earthstone will acquire all of Sabalo Holdings’ interests in Sabalo Energy, LLC (“Sabalo”) and Sabalo Energy, Inc., whose assets include both producing and non-producing oil and gas assets in the northern Midland Basin. In addition, on October 17, 2018, Sabalo entered into an agreement to acquire certain well-bore interests held by Shad Permian, LLC (“Shad”), which were part of a drilling joint venture between Sabalo and Shad. As a result of these agreements, Earthstone expects to acquire 20,800 net acres located in the Midland Basin and an estimated 488 gross operated horizontal drilling locations and 349 gross non-operated horizontal drilling locations for an aggregate purchase price of approximately $950 million (the “Sabalo Acquisition”) which consists of $650 million in cash and $300 million in stock at approximately $9.28 per share comprised of 32,315,695 shares of Earthstone Class B common stock and corresponding membership interests of Earthstone Energy Holdings, LLC. The purchase price is subject to certain customary adjustments, including an increase in the purchase price of approximately $26 million to account for approximately 1,330 acres acquired after the effective date of the Sabalo Acquisition (and included in the net acres mentioned herein). All purchase price adjustments will be paid in cash. Sabalo’s and Shad’s combined average estimated production for the month of September 2018 was approximately 11,200 Boe/d with approximately 83% being oil. Sabalo is a privately-held oil and gas company based in Corpus Christi, Texas and is a portfolio company of EnCap Investments L.P.
The Sabalo Acquisition represents a large, contiguous acreage position with a deep inventory of favorable economic drilling locations and significantly expands Earthstone’s footprint in the Midland Basin. The Sabalo Acquisition is expected to close in late 2018 or in the first quarter of 2019, subject to the satisfaction of customary closing conditions, including the approval of Earthstone’s stockholders as further outlined below.
https://finance.yahoo.com/news/earthsto ... 00101.html
ESTE Update - Oct 17
ESTE Update - Oct 17
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: ESTE Update - Oct 17
Based on an assumed closing of the Sabalo Acquisition on January 1, 2019, Earthstone expects full year 2019 production to range from 25,000 to 29,000 Boe/d (~70% oil) with capital expenditures of $425 million to $500 million. This is based on a three-rig program for the full year and a similar level of activity in the Eagle Ford as in 2018. Between the current time and closing of the Sabalo Acquisition, Earthstone expects to maintain one rig full time in the Midland Basin.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: ESTE Update - Oct 17
I am updating my forecast/valuation model for ESTE today.
Note from John White at Roth Capital: ESTE: A Big Deal in the Midland Basin: Positive
On 10/17/2018 ESTE announced a sizable $950 million acquisition of a privately owned Midland Basin focused E&P company, Sabalo Energy,LLC. We like all of the acquisition metrics contained in the press release, as set forth within our report. The acquisition takes ESTE to the next level in terms of company size as it doubles ESTE’s gross operated Midland Basin locations.
We like the the EV/Flowing BOE per day of $84,800 BOE per day, which is in line with our Permian Basin peer group average of 81,400 BOE per day. The purchase price looks even more attractive considering ESTE provided a PV10% of the proved reserves of $1.2 billion for 91 million BOE of proved reserves (all at recent strip pricing).
With total estimated gross well locations of 837 (488 gross operated and 349 gross non-operated) this yields another attractive metric of about $1.2 million per gross location.
2019 Production Estimate: ESTE further advised that based on an assumed closing on January 1, 2019, ESTE expects full year 2019 production to range from 25,000 to 29,000 BOE per day (70% oil). The midpoint of this range represents a 70% increase over our current 2019 estimate.
The transaction has a list of favorable features that read like an M&A textbook, such as: 1) highly contiguous acreage position comprised of 20,800 net acres (~85% operated) in the core of the northern Midland Basin, largely in Howard County, Texas, 2) 86% of acreage position is held-by-production (HBP), 3) average of 90% working interest in operated units; and, 4) an estimated 488 gross operated locations and 349 gross non-operated locations across four primary formations,
Purchase Price Consideration: The approximate $950 million consists of $650 million in cash and $300 million in shares of ESTE Class B common stock. The cash portion to be funded with proceeds from a combination of: 1) a fully committed $225 million preferred stock issuance, 2) an approximately $500 million issue of unsecured senior notes, 3) a committed revolving credit facility with a minimum borrowing base of $475 million.
Note from John White at Roth Capital: ESTE: A Big Deal in the Midland Basin: Positive
On 10/17/2018 ESTE announced a sizable $950 million acquisition of a privately owned Midland Basin focused E&P company, Sabalo Energy,LLC. We like all of the acquisition metrics contained in the press release, as set forth within our report. The acquisition takes ESTE to the next level in terms of company size as it doubles ESTE’s gross operated Midland Basin locations.
We like the the EV/Flowing BOE per day of $84,800 BOE per day, which is in line with our Permian Basin peer group average of 81,400 BOE per day. The purchase price looks even more attractive considering ESTE provided a PV10% of the proved reserves of $1.2 billion for 91 million BOE of proved reserves (all at recent strip pricing).
With total estimated gross well locations of 837 (488 gross operated and 349 gross non-operated) this yields another attractive metric of about $1.2 million per gross location.
2019 Production Estimate: ESTE further advised that based on an assumed closing on January 1, 2019, ESTE expects full year 2019 production to range from 25,000 to 29,000 BOE per day (70% oil). The midpoint of this range represents a 70% increase over our current 2019 estimate.
The transaction has a list of favorable features that read like an M&A textbook, such as: 1) highly contiguous acreage position comprised of 20,800 net acres (~85% operated) in the core of the northern Midland Basin, largely in Howard County, Texas, 2) 86% of acreage position is held-by-production (HBP), 3) average of 90% working interest in operated units; and, 4) an estimated 488 gross operated locations and 349 gross non-operated locations across four primary formations,
Purchase Price Consideration: The approximate $950 million consists of $650 million in cash and $300 million in shares of ESTE Class B common stock. The cash portion to be funded with proceeds from a combination of: 1) a fully committed $225 million preferred stock issuance, 2) an approximately $500 million issue of unsecured senior notes, 3) a committed revolving credit facility with a minimum borrowing base of $475 million.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group