May 28, 2015Volume 5, No. 4
 
docFinder alert

US deal market moving again – signs of strength

Strategic entries, bolt-ons and relative valuations driving transactions

Slide

Noble Energy

Buys Rosetta Resources


May 11, 2015

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Slide

Vanguard Natural Resources

Takes out LRE and EROC


May 22, 2015

Full Presentation


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This docFinder Alert highlights the resurgence of the M&A markets in the United States after a virtual shutdown in Q1 2015 which saw just $1.8 billion of deals, the slowest quarter since the last meltdown in Q1 2009 which saw $0.5 billion. For perspective, average quarterly deal value since 2007 is $17 billion. Bringing the deal markets back to life is the fact that there is some confidence that a floor in oil prices has been set with WTI spot prices bouncing off a low of $44.12/bbl on January 29. Nearly 4 months after hitting that low, NYMEX oil futures are now in contango with prices currently hovering in the $60 range. In addition, the fact that we completed the Spring borrowing base redetermination season has brought additional clarity among sellers regarding future strategies. To date, the US deal markets are functioning more normally with very few distressed or bargain basement sales.

The largest recent deal is Noble Energy’s buy of Rosetta Resources for $3.9 billion in stock and assumed debt. The slide above left shows Noble’s strategic drivers for the deal. Rosetta brings Noble two new core areas, the Permian basin and the Eagle Ford. This slide shows Nobles’ overall portfolio and the impact of Rosetta’s existing production of 66 Mboe/d (62% liquids) and 282 MMboe of proved reserves. The deal hits all of Noble’s acquisition criteria, including being accretive. The acquisition metrics, according to Noble, are attractive at $58,500 boe/d and $13.65/proved boe.

Playing on a different theme, MLP Vanguard Natural Resources has recently struck twice in back-to-back deals to consolidate the upstream MLP space – a space where growth by acquisitions is a perennial driver and now a space in which corporate and operating efficiencies gained through scale are increasingly important. In the first deal, a $539 million buy of fellow MLP LRR Energy, VNR gained 40 MMcfe/d and 203 Bcfe of proved reserves with a R/P of 14 years, primarily in the Permian Basin and Mid-Continent regions, which overlap nicely with VNR’s existing portfolio. Just a month later on May 21, VNR struck again by buying fellow MLP Eagle Rock Energy Partners. Like the LRE deal, VNR used equity and bought EROC for $614 million in stock and assumed debt. This slide shows EROC’s asset profile, which includes 80 MMcfe/d of current production and 318 Bcfe of proved reserves with a R/P of 12 years. The slide above right shows the full picture of the combined assets of VNR, LRE and EROC. This slide shows the operational metrics of the combined companies with VNR’s quarterly revenue growing 47% from $99 MM to $146 MM pro forma. In terms of capitalization, VNRs leverage ratios improve with the deals, with Net Debt/2014 EBITDA decreasing from 3.5x to 3.0x


More HOT slides and data below.
Shown below are more hot slides from PLS’s docFinder database that highlight other recent deals and the plays that drive the deals.  Below are slides from Diamondback Energy, Emerald Oil, Rex Energy, and Gulfport Energy.


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featured.slides from docFinder

Slide Slide Slide Slide

Diamondback Energy

Midland Basin

May 6, 2015

Emerald Oil

Delaware Basin

May 11, 2015

Rex/ArcLight JV

Marcellus

May 6, 2015

Gulfport Energy

Utica

May 6, 2015

Diamondback Energy is delivering high returns and expecting 60% IRR at $60 oil. As the slide above shows, FANG is continuing its strong growth and recently bought 11,948 net acres in the core of the northern Midland basin for $438 million. Located mainly in Howard County, the deal brings acreage which, based on wells in the immediate proximity, rank within the top quartile of FANG’s portfolio. Three horizontal zones have been de-risked including the Wolfcamp A and B and the Lower Spraberry. Some of the purchase price will be offset with an offer out to VNOM for $33.7 million for a 1.5% GORR on the acreage. This slide shows the compelling accretive nature of the deal to FANG’s inventory as well as attractive costs of $23,845 per acre and $2.05 per resource boe.

Emerald Oil announced on May 11 a deal to buy 10,746 net acres in Lea and Eddy counties, New Mexico for $75 million. According to EOX, the deal was internally sourced and equates to a purchase price of $7,000 per acre. EOX believes the assets bring more than 400 potential locations targeting multi-stacked, oil-weighted pay. This slide shows the great neighborhood around the acreage which lies in the core of the Delaware Basin. EOX has identified its targeted buy area and through science and well results to date believes the Delaware Basin is at an inflection. Backing up this claim is data showing upward EUR improvement in which the Bone Spring/Wolfcamp zones in the northern Delaware Basin generate similar EURs as the more mature Wolfcamp zone in the northern Midland Basin.

Rex Energy partnered with private equity company ArcLight Capital to form a JV in its core Marcellus Butler Area in southwest Pennsylvania. The JVA allows the partners to develop 32 designated wells with ArcLight participating by funding 35%. The wells are evenly split between REXX’s Butler legacy are and its Moraine East area. In the Moraine East area, for each well drilled (D&C of $3.7 million) reserve adds total 20.7 Bcfe (8.8 Bcfe of the well plus 11.9 Bcfe of PUDs) The value of the JV to Rexx is $67 million. Also, ArcLight’s 35% WI will revert to 17.5% upon certain IRR and ROI thresholds on groups of wells. ArcLight gets an option to participate in 17 more Moraine East wells in 2016 at a 20% WI. This final slide shows REXX’s next moves in the JV and divesture arena.

Gulfport Resources expanded on its strong Utica performance in 2014 with a $301 MM corporate cash buy of privately-held Paloma Partners III announced April 15. The deal brings 24,000 net acres at a price of $12,700/acre. Located in Belmont and Jefferson counties, Ohio just to the east of GPOR’s existing Utica dry gas position, the deal adds 150 more Utica locations based on 160 acre spacing. Ohio’s Utica shale has been the backbone of GPOR’s growth and it now is producing 396 MMcfe/d or 93% of GPORs overall production. With a strong balance sheet, GPOR was guiding towards a 2015 exit rate of between 432 and 480 MMcfe/d before acquiring Paloma. After Paloma, GPOR now owns 208,000 net Utica acres with 907 Bcfe proved reserves.

 

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