Analyst Commentary
From Capital One:
• Acreage valuation metrics: The adjusted price equates to ~$23K/acre, after ascribing ~$41MM of value for the existing production (at $60K per flowing bbl/d for oil and $4K per flowing Mcf/d for gas) and $14MM for the DUCs ($2.5MM/well). Overall, this adjusted value is slightly below recent Delaware acquisitions such as WPX’s Panther acquisition at $27K/acre and similar to PDCE’s January acquisition at $23K/acre. The Orla adjacent to REN’s Appaloosa and WPX’s Stateline acreage likely commanded a significantly higher price tag than the Southwest Rim package near APA’s Alpine High.
• Other deal metrics: Price tag equates to ~11% of REN's enterprise value. REN also received 2 wells producing ~800 boe/d and 6 DUCs on the Orla properties (near its existing Appaloosa acreage where REN has generally posted its highest IP wells). REN is weighing whether to add a 3rd Delaware rig to the Orla properties at mid-year. Please click here for relevant maps showing REN’s Delaware properties and offset operator activity.
From KLR Group:
Assuming a ~$40k/Boe production rate multiple and ~$5K/acre for Southwest Rim, the acquisition equates to an elevated ~$53K/acre valuation for the Orla acreage, net of production. To fund the acquisition, the company has entered into a $100 million bridge facility and is evaluating ultimate long-term financing that comprises debt and equity. The acquisition includes six Wolfcamp DUCs in Orla (four ~4,500’ laterals, two ~7,500’ laterals). The company plans to complete the DUCs immediately following transaction closing and increase Delaware Basin drilling activity from two rigs to three rigs in 2H/17, with the additional rig allocated to Orla. We were expecting Resolute adds a third rig in’18. In Orla, Resolute believes the acreage includes 112 gross (54 net) drilling locations in the upper/lower Wolfcamp A and Wolfcamp B, with potential prospectivity in the Wolfcamp X/Y and Wolfcamp C. The company believes the Southwest Rim acreage could be prospective for the Wolfcamp, Barnett and Woodford horizons. The acquisition increases Resolute’s Delaware Basin leasehold to ~21,000 net acres. The transaction is expected to close mid-May. The acquisition should have a minor negative value impact due to the acceleration of drilling activity partly offset by the elevated purchase price, a portion of which is likely equity-financed.
