QEP Resources, Inc. (ticker: QEP) is a leading independent natural gas and crude oil exploration and production company focused in two major regions: the Northern Region (primarily in the Rockies and the Williston Basin) and the Southern Region (primarily Oklahoma, Louisiana, and the Texas Panhandle) of the United States. QEP Resources also gathers, compresses, treats, processes and stores natural gas.
On June 3, 2013, the company provided an update to operating results for the second quarter 2013.
- QEP has completed and turned to sales its first four-well pad on the recently acquired South Antelope property in the Williston Basin of North Dakota. The four wells had an average 24-hour gross initial production rate of 3,598 barrels of oil equivalent per day (Boepd) per well (3,929 Boepd post processing), including the first two QEP-operated Bakken Formation wells completed at South Antelope that had an average 24-hour initial production rate of 4,174 Boepd per well (4,584 Boepd post processing).
- The company has also completed nine new wells (four Bakken and five Three Forks) on two QEP-operated multi-well pads on the Fort Berthold Indian Reservation. The new wells had an average 24-hour gross initial production rate of 2,379 Boepd per well (2,573 Boepd post processing).
- A fifth company-operated rig is currently moving onto location on the South Antelope property and is expected to commence the first well on a multi-well pad by mid-June. With the addition of this rig, QEP will have eight company-operated drilling rigs active in the Williston Basin.
- Construction of QEP Field Services’ 10,000 barrel-per-day Blacks Fork fractionator expansion is nearing completion and commissioning and startup is expected to commence in early June.
“I am pleased with QEP’s strong operational results this quarter and I am encouraged by the very strong well results from our first operated multi-well pad on the South Antelope Acquisition,” commented Chuck Stanley, Chairman, President and CEO of QEP Resources. “As anticipated, it has taken some time to transition to pad development, where multiple wells are drilled and cased before completion activity commences. Based on our experience in other resource plays, we believe this is the right approach for efficient development of the Bakken and Three Forks reservoirs in the Williston Basin. In addition, recent well completions on our Fort Berthold Indian Reservation assets continue to exhibit strong initial performance. The fifth rig on the South Antelope property (our eighth operated rig in the Williston Basin) has arrived ahead of schedule and will begin drilling soon.
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“At QEP Field Services, the Blacks Fork fractionator expansion is poised to come online ahead of schedule and on budget. When fully operational, NGL fractionation capacity at Blacks Fork will total 15,000 barrels per day. To support this expansion, QEP is doubling existing railcar loading capacity at Blacks Fork to facilitate access to what are often higher-value local, regional, and national NGL markets.
“Overall, the QEP team continues to execute well. We are very pleased by the initial results of our first pad wells at South Antelope, in particular the extremely strong Bakken well results, and are excited about the potential positive impact of combining QEP’s expertise in efficient drilling and completion operations with this top-quality asset,” concluded Stanley.
Oil & Gas 360® compiled a few paragraphs from research analysts who wrote on QEP Resources following the announcement. OAG360 suggests that you contact the analyst and/or salesperson to receive a complete copy of the report. Please read the important disclosures at the end of this note.
*Wells Fargo Securities (6.4.13)
QEP: Wouldn’t That Be Nice? First Antelope Pad Produces 14,400 Boe/d in First 24 Hours. QEP reported results from the first four well pad in the Antelope area, which is a property the company spent $1.4 billion to acquire last year. The pad had a gross 24-hour IP of 14,400 Boe/d, with the Bakken wells averaging 4,174 Boe/d each, and the Three Forks wells averaging 3,022 Boe/d each. QEP estimates current cost of these wells at around $10.8 million. Obviously difficult to read too much into a 24-hour rate but those are impressive numbers. Many questioned the companies purchase price of this acreage last year. If the company keeps delivering wells like this, not many will remember what the purchase price was. As a reminder, here were our thoughts on the metrics: ”Applying multiple of $100,000/Boe/d, we attribute a production value of $1.05B to the deal. About 23,000 net acres are undeveloped, implies an undeveloped value of $14,331/acre. Deal metrics may look a little rich to some but not far out of line and makes sense to us to step up and acquire core acreage.” The company expects average EURs of 1.0-1.1 MMBoe per well in the Bakken and Three Forks. Well results like this should help support those numbers. Company also announced results from nine wells on the Fort Berthold Reservation that had average 24-hour rates of 2,379 Boe/d. The company now has 8 rigs up and running in Basin.
*Raymond James Equity Research (6.4.13)
QEP: Bakken Results Impress in 2Q13 Ops Update
Recommendation: Following last night’s operations update, we are slightly increasing our 2013 estimates and reiterating our Outperform rating on shares of QEP. Shares have seen a slight rebound after the company filed its much-anticipated S-1 for QEP Midstream. We believe that the company will continue to unlock value as it drops down its midstream assets into the MLP, which garner a premium multiple to the higher-risk E&P business. Further, despite some headwinds in the Cana asset sale process, to date the package remains on the market along with its Texas Panhandle properties. A potential monetization would further shore up the balance sheet and provide additional dry powder to plow into the E&P segment and its high returning Bakken assets. Finally, QEP’s South Antelope acreage is in close proximity to Kodiak’s newly acquired acreage, which has been cited as a premium asset package (see 6/3/2013 note “Upsizing Bakken at a Discount; “KOG”s of Growth Remain in Motion”) and could hold potential upside.
Multi well pads bring impressive IP’s: QEP recently brought online its first four-well pad on its South Antelope property in the Williston Basin. The wells averaged 3,598 BOE/D per well – or 3,929 BOE/D post processing (24-hr IP). This included two wells that came in over 4,000 BOE/D. Additionally, the company brought online nine wells (four Bakken, five Three Forks) on two multi well pads on its Fort Berthold acreage. These wells averaged 24-hr IP rates of 2,379 BOE/D (2,573 BOE/D post processing) apiece. Given the strong results, QEP has moved a fifth operated rig to its South Antelope field, and will commence multi well pad drilling in mid-June. This brings total operated rig activity in the Williston to eight.
Estimates: We are increasing our 2013 EPS 2% to $1.36 while increasing CFPS/EBITDA 1%/1% to $7.97/$1,592 million. Our 2014 estimates are unchanged.
Valuation: Our $38 target price is based on a 9.5x EV/EBITDA multiple on $236 million for the midstream business (in line with our average gathering and processing comp group multiple) and a 6.0x E&P EV/EBITDA multiple on $1,357 million for the E&P business, in line with our five-year historical E&P EV/EBITDA multiple range of 5-7x.
*Capital One Southcoast (6.4.13)
QEP 2Q Update
QEP announced a strong four-well pad from the South Antelope acreage in an operations update yesterday after the close. The 4-well average IP (24-hr) was 3,929 boe/d with the two Bakken completions averaging 4,584 boe/d. Fort Berthold results from nine additional wells (4 Bakken, 5 Three Forks) were also strong as the completions from two pads had a 24-hr IP average of 2,573 boe/d. We model EURs of 900 Mboe in South Antelope (QEP estimates ~1.1 MMboe) and 550 Mboe in Fort Berthold (QEP estimates a range of 300 – 900 Mboe). In each case, the early indication is that these wells easily exceed our estimates. QEP paid around $20K/acre for the S. Antelope acreage, and we said at the time that it was money well spent as long as the seemingly lofty 1+ MMboe EUR estimate was accurate. These wells go far to justify the cost of the acquisition (using 1.1 MMboe EURs would add $2/share to our target), and we expect QEP to outperform in today’s trading. We will continue to watch for midstream MLP details and will be interested to see how large of a minority interest will be offered to the public for the proposed $400MM in capital and view anything less than ~45% as positive vs our valuation.
*Baird Equity Research (6.4.13)
QEP provides positive operational update, with solid first operated results from South Antelope area. QEP announced after last night’s close that it has turned to sales its first four-well pad in the South Antelope area with an average 24-hr IP of 3,598 boe/d (3,929 boe/d post processing). Two of these were first QEP-operated Bakken wells and posted average 24-hr IPs of 4,174 boe/d (4,584 boe/d post processing). Fifth South Antelope rig expected to begin drilling in mid-June; on track as anticipated. In Fort Berthold, nine wells (four Bakken, five TFS) were turned to sales on two pads with average 24-hr IP rates of 2,379 boe/d (2,573 boe/d post processing). Blacks Fork NGL fractionator expansion remains on budget and is expected to begin operations in early June (previous target was mid-2013). We view this as a modestly positive operational update for QEP shares due to solid first operated South Antelope well results and management demonstrating execution.
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