NFX - Stifel likes STACK acquisiiton
Posted: Fri May 06, 2016 10:29 am
From Stifel this morning:
NFX's acquisition of 42,000 net acres prospective for the Meramec causes us to raise our risked NAV estimate 7% to $45/share. Management has identified 1,000 potential drilling locations on the new acreage.
Acquisition Extends STACK Footprint
Before the open, NFX announced it entered into agreements with a subsidiary of
Chesapeake Energy Corporation to acquire 42,000 net STACK acres in Kingfisher,
Blaine, Canadian, and Dewey Counties, OK (Exhibit 1) for a total purchase price
of $470 million. The acquired assets include current production of 3,800 Boe/d
(55% liquids) which management expects will more than double by YE16 as
recently drilled wells are completed and turned to sales. After backing out the value
for the current production and uncompleted wells (~$50 million), NFX estimates it
paid approximately $10,000/acre. Including this acquisition, NFX has paid less
than $3,000/acre on average for its 265,000 net acre (50% working interest)
STACK position. The transaction will have an effective date of 4/1/16 and is
expected to close during 2Q16. NFX will fund the acquisition with its cash balance
($585 million at 1Q16), which stemmed from its equity offering completed in late
1Q16.
Acreage Overlaps NFX Acreage and Offset Activity
We estimate that approximately 25% of the purchased acreage has a direct
overlap with NFX's acreage and approximately 2/3 of the acreage has been
delineated by NFX and/or its competitors (Exhibit 2).
Limited Near-Term Development Capital Requirements
With more than 90% of the acquired acreage held by production, the acquisition
will require only modest capital spending over the next few years. This is in
contrast to NFX's legacy 225,000 net acre STACK position which is expected to be
only 65% HBP by YE16.
Increasing NAV, Tweaking CFPS Estimates
We are assuming that 25% of the acquired acreage falls within management's
existing type curve regime and the remainder falls within CLR's published type
curve regime. After incorporating the newly acquired acreage, we are increasing
our total risked NAV 7% to $45/share (Exhibit 3). We expect NFX management
will release a new type curve in 2H16 or early 2017 specifically related to the newly
acquired eastern STACK acreage, which tends to be downdip and have a higher
GOR.
Incorporating the acquired production of 3,500 Boe/d causes us to increase our
FY16 and FY17 CFPS estimates 1.1% and 1.8% to $3.88 and $5.80/share.
NFX's acquisition of 42,000 net acres prospective for the Meramec causes us to raise our risked NAV estimate 7% to $45/share. Management has identified 1,000 potential drilling locations on the new acreage.
Acquisition Extends STACK Footprint
Before the open, NFX announced it entered into agreements with a subsidiary of
Chesapeake Energy Corporation to acquire 42,000 net STACK acres in Kingfisher,
Blaine, Canadian, and Dewey Counties, OK (Exhibit 1) for a total purchase price
of $470 million. The acquired assets include current production of 3,800 Boe/d
(55% liquids) which management expects will more than double by YE16 as
recently drilled wells are completed and turned to sales. After backing out the value
for the current production and uncompleted wells (~$50 million), NFX estimates it
paid approximately $10,000/acre. Including this acquisition, NFX has paid less
than $3,000/acre on average for its 265,000 net acre (50% working interest)
STACK position. The transaction will have an effective date of 4/1/16 and is
expected to close during 2Q16. NFX will fund the acquisition with its cash balance
($585 million at 1Q16), which stemmed from its equity offering completed in late
1Q16.
Acreage Overlaps NFX Acreage and Offset Activity
We estimate that approximately 25% of the purchased acreage has a direct
overlap with NFX's acreage and approximately 2/3 of the acreage has been
delineated by NFX and/or its competitors (Exhibit 2).
Limited Near-Term Development Capital Requirements
With more than 90% of the acquired acreage held by production, the acquisition
will require only modest capital spending over the next few years. This is in
contrast to NFX's legacy 225,000 net acre STACK position which is expected to be
only 65% HBP by YE16.
Increasing NAV, Tweaking CFPS Estimates
We are assuming that 25% of the acquired acreage falls within management's
existing type curve regime and the remainder falls within CLR's published type
curve regime. After incorporating the newly acquired acreage, we are increasing
our total risked NAV 7% to $45/share (Exhibit 3). We expect NFX management
will release a new type curve in 2H16 or early 2017 specifically related to the newly
acquired eastern STACK acreage, which tends to be downdip and have a higher
GOR.
Incorporating the acquired production of 3,500 Boe/d causes us to increase our
FY16 and FY17 CFPS estimates 1.1% and 1.8% to $3.88 and $5.80/share.