The acquisition announced by PDCE is VERY GOOD NEWS for Carrizo.
Carrizo has found a buyer for their stake in the Utica/Marcellus and they recently opened a dataroom to sell their stake in the DJ Basin. They hope to close both sales by year-end, so they can complete their plan to become a pure play on Texas. Carrizo has a core position in the Eagle Fore already and they are rapidly building one in the Permian Basin.
PDCE paid $210 million for 2,200 BOE per day of production (~60% crude oil) and 8,300 net acres of "core leasehold" in the DJ Basin Wattenberg Field.
CRZO has 33,000 net acres with 1,800 BOE per day of production for sale in the DJ Basin. My SWAG is that approximately a third of the Carrizo leasehold is Tier One or "core" quality. Most of the Carrizo leasehold is held by production, which is very good since the Buyer will not have to immediately start drilling to hold acreage. Operated + HBP leasehold is attractive in this market. There is lots of money looking for proven reserves with development upside. I get at least one call per month from a group looking to buy packages just like this.
I thought the Carrizo package might go for around $100 million. If it sells for $200 million it will be FANTASTIC NEWS. Not only will that make the debt holders happy, the cash will more than fill the gap between my 2018 operating cash flow estimate ($520 million) and the $600 million drilling program that I'd like Carrizo to announce for Texas. If they can add two more rigs to their current Texas drilling program, it will take my 2018 production estimate and my valuation of CRZO a lot higher.
CRZO closed at $17.25 today. First Call's price target is $26.00. First Call's price target will go a lot higher if Carrizo announces a DJ Basin sale anywhere close to what PDCE paid for their deal.
Carrizo Oil & Gas (CRZO)
Carrizo Oil & Gas (CRZO)
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Carrizo Oil & Gas (CRZO)
More good news for CRZO:
Noble Energy has updated their production guidance: The company updated outlook on the back of several favorable factors. Better-than-expected rise in DJ Basin volumes due to robust performance in Wells Ranch and East Pony have led to an increased oil production. Along with this, its first central gathering facility came online in July andhasbeen connected to the Advantage Pipeline taking crude volumes to Crane County, TX.
Robust performance in Eagle Ford due to increase in South Gates Ranch activityas well as inAlba field reflect an overall increase in the company’s production volumes.
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This is good news for Carrizo because most of their DJ Basin leasehold that is for sale sits between Noble's Wells Ranch and East Pony areas. About 10,000 acres is considered Tier One leasehold.
Noble Energy has updated their production guidance: The company updated outlook on the back of several favorable factors. Better-than-expected rise in DJ Basin volumes due to robust performance in Wells Ranch and East Pony have led to an increased oil production. Along with this, its first central gathering facility came online in July andhasbeen connected to the Advantage Pipeline taking crude volumes to Crane County, TX.
Robust performance in Eagle Ford due to increase in South Gates Ranch activityas well as inAlba field reflect an overall increase in the company’s production volumes.
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This is good news for Carrizo because most of their DJ Basin leasehold that is for sale sits between Noble's Wells Ranch and East Pony areas. About 10,000 acres is considered Tier One leasehold.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group