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Current RSPP Stock Info

RSP Permian (ticker: RSPP), a Permian pure-play with more than 47,000 acres in West Texas, has signed a letter of intent to increase its footprint by about 4,100 net acres for an aggregate purchase price of $137 million. The agreement, made on October 7, 2015, is expected to close in Q4’15 and is part of a privately negotiated agreement with Wolfberry Partners Resources LLC – an entity owned in part by affiliates of RSPP.

In accordance with the potential acquisition, RSP Permian announced a public stock offering that is expected to raise a gross total of $193.8 million, excluding underwriting fees. Assuming a fully successful stock offering of 7.6 million shares priced at $25.50/share, RSP will have roughly $50 million in excess capital. The additional stock count will dilute RSP by approximately 7%.

RSP Permian Timeline: Acquisitions

The latest acquisition marks the third in principle by RSP since its inception and the second since August 2015. Its new properties consist of 25 producing wells (21 verticals) and production volumes of 1,900 BOEPD, with an additional 86 net horizontal drilling locations across five pay zones. Irene Haas, Senior Research Analyst for Wunderlich Securities, said the announcements were “very good timing” for the deal and equity raise, citing the recent rally in the E&P space.

Combined with its August purchase, the company has added more than 6,800 net acres and 248 horizontal drilling locations to its inventory while increasing its output by 3,400 BOEPD. Upon closing, the company will have increased its horizontal locations by 25% with the two purchase agreements. The boosts in acreage and reserves have been reflected in the company’s borrowing bases, as shown in the acquisition table below.


Date Price ($MM) Net Acreage BOEPD $/Acre $/BOEPD
7/25/2014 $259 6,652 1,100 $38,935 $235,454
9/2/2014 Borrowing Base Increased to $500 million from $375 million
8/3/2015 $274 5,704 1,569 $48,036 $174,633
8/25/2015 Borrowing Base Increased to $600 million from $500 million
#10/7/2015 $137 4,100 1,900 $33,414 $72,105

RSP Timeline: Equity Raises

The latest announcement marks the fifth time RSP Permian has sold public shares to raise capital, including its Initial Public Offering (IPO) in January 2014. Two separate private placements have occurred since September 2014 and raised gross proceeds of $700 million. Including all capital raises upon its inception, RSPP has generated approximately $1.4 billion in net proceeds. The full list is below:

Capital Raises

Date Type RSPP-Sold Shares Price Net Proceeds
1/23/2014 Initial Public Offering 9,225,000* $19.50 $166,000,000
8/12/2014 Public Offering 4,791,667* $25.65 $117,800,000
9/23/2014 Private Placement 6.625% senior unsecured notes* $488,600,000
3/17/2015 Public Offering 5,750,000* $25.80 $147,100,000
8/4/2015 Public Offering 7,000,000* $22.50 $157,500,000
8/5/2015 Private Placement 6.625% senior unsecured notes* $200,000,000^
10/7/2015 Public Offering 7,600,000 $25.50 $193,800,000^
*includes greenshoe/upsized placement        ^gross Total $1,470,800,000

Assuming the 7,600 shares are entirely sold, the company will have diluted its share count by approximately 25% since its January 2014 IPO. In the same time frame, its offered share pricing has increased by more than 30% and its borrowing base has doubled.

The company has also secured its near-term balance sheet, as the revolving credit facility does not mature until 2019 and the $700 million in senior unsecured notes are due in 2022. RSP’s liquidity will climb to more than $800 million upon the successful closing of the latest public offering.

RSPP Acreage (Prior to Latest Acquisition)

RSPP Acreage (Prior to Latest Acquisition)

Permian Production Rising (As Usual)

Production from United States shale plays has been declining in 2015 due to the pullback in activity, but the Permian Basin has bucked the trend. The Energy Information Administration (EIA) estimates the nation’s top-producing play will achieve the 2 MMBOPD production milestone in October – enough to rank 15th globally as a stand-alone nation.

RSP announced the type curves for its Middle Spraberry, Lower Spraberry and Wolfcamp A zones are increasing but did not give specifics. The respective type curves for the above pay zones are currently 615, 665 and 665 MBOES. In comparison, peer averages are anywhere from 800 to 1,000 MBOES for the same respective zones. RSP expects its Q3’15 production to average 23.5 to 24.0 MBOEPD, up about 20% from Q2’15’s average of roughly 19.8 MBOEPD and more than double the volumes from Q3’14.

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