RSP Permian valuation raised
Posted: Sat Oct 15, 2016 11:31 am
I have updated my forecast model for RSPP. The Silver Hills acquisitions will increase production to 50,000 Boepd by year-end and sets the company up to be a BIG Permian growth story in 2017.
My production estimate for 2017 is only 54,000 Boepd (69% crude oil, 17% NGLs and 14% natural gas) since the company has not provided 2017 guidance. Obviously, there is a lot of upside to these numbers if they have an aggressive drilling program. You don't buy a deal this big unless you plan to aggressively drill it.
My valuation increases by $1.75 to $47.00/share, which compares to First Call's price target of $44.55.
Expect a lot of attention to RSPP after they release Q3 results and a detailed operations update.
For comparison, FANG's production is ~45,000 Boepd and it is trading at a much higher multiple of operating cash flow per share than I am using in my valuation of RSPP. Not an apples-to-apples comparison since FANG has such a valuable asset in Viper.
My production estimate for 2017 is only 54,000 Boepd (69% crude oil, 17% NGLs and 14% natural gas) since the company has not provided 2017 guidance. Obviously, there is a lot of upside to these numbers if they have an aggressive drilling program. You don't buy a deal this big unless you plan to aggressively drill it.
My valuation increases by $1.75 to $47.00/share, which compares to First Call's price target of $44.55.
Expect a lot of attention to RSPP after they release Q3 results and a detailed operations update.
For comparison, FANG's production is ~45,000 Boepd and it is trading at a much higher multiple of operating cash flow per share than I am using in my valuation of RSPP. Not an apples-to-apples comparison since FANG has such a valuable asset in Viper.