Current RSPP Stock Info

RSP snags 15 MBOEPD of Permian Basin production

RSP Permian (ticker: RSPP) today announced it has entered into definitive agreements to acquire Silver Hill Energy Partners, LLC (“SHEP I”) and Silver Hill E&P II, LLC (“SHEP II,” and together with SHEP I, “Silver Hill”) for $1.25 billion of cash and 31.0 million shares of RSP common stock in aggregate, implying a total purchase price of approximately $2.4 billion.

Silver Hill is comprised of two privately held entities controlled by affiliates of Kayne Anderson Capital Advisors and Ridgemont Equity Partners that collectively own approximately 68,000 gross /41,000 net acres in northeast Loving and northwest Winkler Counties, Texas with roughly 15 MBOEPD of current net production from 58 producing wells (49 horizontals) and about 3,200 gross /1,950 net total undeveloped locations.

RSP Permian acquisition map of Silver Hill

While both transactions will have an effective date of November 1, 2016, the two transactions will close separately.  SHEP I is expected to close in the fourth quarter of 2016, with Silver Hill receiving approximately $604 million of cash and 15.0 million RSP shares.  SHEP II is expected to close in the first quarter of 2017, with Silver Hill receiving approximately $646 million of cash and 16.0 million RSP shares, according to the company’s press release.

Upon closing of SHEP II, Kayne Anderson, Ridgemont and other Silver Hill shareholders are expected to collectively own approximately 20% of RSP’s outstanding shares pro forma for the issuance to Silver Hill and the concurrent equity offering that will fund a portion of the consideration for the acquisition.  In addition, RSP expects to add Kyle D. Miller, CEO of Silver Hill, to RSP’s Board of Directors upon closing SHEP II.

Transaction highlights

  • The acquisition creates substantial scale with combined current production of approximately 50 MBOEPD, over 100,000 net surface acres, over 500,000 net effective horizontal acres and over 3,600 net drilling locations with substantial additional upside from tighter spacing assumptions
  • Unique acquisition of a highly contiguous acreage position in the core of the Delaware Basin that has approximately 68,000 gross / 41,000 net surface acres located in Loving and Winkler counties
    • Acreage located in the thickest, deepest part of the Delaware Basin, which is significantly over-pressured
    • Blocked up acreage configuration conducive for longer laterals and efficient development
    • Located in an oil-weighted area of the Delaware Basin
    • ~250,000 net effective horizontal acres across 7 horizontal pay zones
    • Significant operational control with over 80% of acreage operated
    • Average working interest in operated properties of approximately 83%
    • One operated rig holds acreage position
    • Offset operators include EOG, Anadarko, Shell, Matador and Devon
    • Meaningful and growing production base with current net production of approximately 15.0 MBOEPD (69% oil, 86% liquids) and two operated horizontal rigs currently drilling on acreage position
  • Deep inventory of attractive horizontal drilling locations across multiple horizontal stacked pay zones, including the Wolfcamp B, upper and lower Wolfcamp A, 3rd Bone Spring, 2nd Bone Spring, Avalon, and Brushy Canyon
    • EURs  of ~1.0 MMBOE common across acreage position based on management’s estimates
    • ~3,200 gross / ~1,950 net locations with average lateral length of approximately 6,300′
      • Acreage trades on-going for longer lateral development


In order to pay the cash portion of the acquisition, RSP also announced that it will be offering 22,000,000 shares of common stock, upsized from 20,000,000. The company has granted the underwriters a 30-day option to purchase up to an additional 3,300,000 shares of common stock as well. RSP Permian expects total gross proceeds of $874.5 million.

Analyst Commentary

Capital One Securities
• RSP Permian is significantly growing its Permian footprint with its entry into the Delaware Basin by agreeing to acquire privately held Silver Hill Energy Partners for $2.4B ($1.25B cash + 31MM RSPP shares). The price tag is consistent with the >$2B valuation that has been kicked around in recent media reports. The deal includes ~41K net acres and ~15 Mboe/d of current production located primarily in Loving and Winkler Counties.
• Deal price works out to ~$41K/acre adj for the production (69% oil, 86% liquids), which is above recent Delaware deals priced in the $20K - $26K/acre range after adjusting for production

RSP Permian, Inc. (RSPP) reports $2.4B acquisition of Delaware-focused Silver Hill Energy Partners; prices upsized
$875MM share common offering. RSP Permian, Inc. (RSPP) will make this purchase with a combination of $1.25B in cash
and 31.0MM shares of RSP shared. Backed by Kayne Anderson and Ridgemont, Silver Hill holds approximately 41,000 net
acres in Loving and Winkler counties, TX (implied unadjusted purchase price of $58,537 per acre) and 1,950 net undeveloped
locations (implied unadjusted purchase price of $1.2MM per location). To help fund the cash portion of the deal, RSP sold
22.0MM shares of common stock overnight, upsized 10% from the originally announced 20.0MM share size, at $39.75/share,
a 4.8% discount to last night’s closing price of $41.75. RSP also pre-announced 3Q16 production of 29.7 Mboe/d, 4.2% above
the 28.5 Mboe/d consensus and up 13% sequentially

After market close, RSP Permian (RSPP, NC) announced that it is acquiring Silver Hill Energy Partners, LLC (private) and
its 41M net acres in the Delaware Basin for $2.4B (Figure 1). Assuming $35M/Boe/d for 15MBoe/d of production, the
implied purchase price of ~$45M/acre for the Delaware Basin properties is higher than recent transactions in the basin
including $8M/acre for 186M net acres paid by EOG on 9/6/16, $22M/acre by PDCE for 57M net acres on 8/23/16,
$27M/acre by FANG for 19M net acres on 7/13/16, and $15M/acre by CXO for 12M net acres on 1/18/16. RSPP cited the
unique contiguous acreage position controlled by Silver Hill, its 7 potential pay zones, EURs of ~1,000 MBoe, and 1,950
net locations as highlights of the acquisition.
While Silver Hill was widely expected to fetch $2B or more, the acquisition underscores RSPP's confidence in the
company's largely undeveloped oil resource in multiple zones including the Upper and Lower Wolfcamp A, 3rd Bone
Spring, Avalon Shale, and Brushy Canyon.

KLR Group
RSPP plans to scale its rig count from three currently (legacy assets) to eight by year-end ’17 (4 in Delaware and 4 in Midland). Adjusting for the acquisition, our preliminary production outlook for '17 moves from ~34.8 MBoepd to ~52.5 MBoepd (company guide of 52-56 MBoepd) and we now anticipate RSPP spends ~$560 million (guide of $520-$560 million) on D&C capex.  

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