After QEP Williston asset buy, Vantage Energy will be $1.5 billion Bakken operator

QEP Resources (ticker: QEP) continued its shift toward a pure-play Permian company today, selling its Williston Basin assets.

Vantage Energy Acquisition Corp. (ticker: VEAC), a SPAC backed by NGP and led by former Encana President and Vantage Energy LLC Chairman and CEO Roger Biemans, is the buyer. Vantage will acquire all of QEP’s Williston Basin assets, including acreage and mineral interests.

In total Vantage has purchased 102,800 net acres, which are producing 46 MBOEPD. Including refracturing opportunities, Vantage has identified 419 gross locations on this acreage. Current plans call for two operated rigs in 2019. Based on consensus pricing of $69.25 WTI and $2.99 gas, the assets will yield $427 million in EBITDA in 2019.

Another Blockbuster Oil Deal Creates Largest Bakken Pure-Play

Source: Vantage Investor Presentation

Vantage will pay $1.65 billion in cash to QEP, plus up to 5.8 million shares of Vantage stock if certain targets are met. This stock portion would be worth up to $50 million. The transaction value equates to $16,050 per acre, or just under $35,900 per BOE of production. This cost is almost directly in line with the standard $35,000 per BOEPD, suggesting Vantage was likely paying primarily for the current production. Based on Vantage’s estimate of EBITDA, this deal is valued at 3.6x 2019 EBITDA.

After close of this deal, which is expected in late Q1 or early Q2 2019, Vantage will be a major pure-play Bakken company, named Vantage Energy Inc. and trading under the ticker VEI. With an enterprise value of $1.5 billion, the company will be the largest pure-play Bakken E&P in the market, as larger Bakken operators have operations out of the basin. The company reports there are significant consolidation opportunities available in the Bakken, as many private operators in the basin are seeking an exit and public operators are looking to realign portfolios.

QEP is nearly a Permian pure-play

This deal advances QEP’s efforts to become a pure-play Permian operator, a change it has been pursuing for the past year. The company sold its Uintah Basin assets for $155 million in July, meaning the only assets left are in the Haynesville. QEP mentioned in its Q2 conference call that all the bids it received for its Bakken assets were insufficient and it would hold on to the assets. Now that QEP has sold its Bakken holdings it will use the proceeds to fund development in the Permian and pay down debt.

Biemans commented on the acquisition, saying “Since our IPO, the Vantage team has evaluated opportunities across North America with a relentless focus on resource quality and equity value creation.  With this acquisition, we believe we have delivered on our IPO goals by acquiring assets in the core of a world-class oil resource play with a strong production base and significant projected free cash flow growth for years to come. Vantage represents a highly-differentiated return of capital opportunity for our shareholders, with a day-one dividend and a deep inventory of low-risk, high-return reinvestment opportunities.  Furthermore, the valuation of the transaction presents an attractive, low-multiple investment opportunity with significant upside in a basin with rapidly improving well results.  We look forward to working with our shareholders to close the transaction.”

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