Current SYRG Stock Info

Synergy equity deal expected to raise $150 million in initial offering with $30 million greenshoe offering

Denver-based Synergy Resources (ticker: SYRG) announced a public offering of 19.5 million shares of its common stock for total proceeds of approximately $150 million, according to a company statement. Synergy will also allow a follow-on offering of 2.93 million shares, which would bring total proceeds to about $180 million. The offer will increase the company’s shares outstanding by about 18%.

In its press release, Synergy said the proceeds for the offering would be used for “general corporate purposes, which may include continuing to develop its acreage position in the Wattenberg Field in Colorado, funding a portion of its capital expenditure program for the remainder of 2016, or … potential future acquisitions.”

This equity raise is the second for the company already this year. In late January, Synergy announced the sale of 10 million shares with an additional 1.5 million share greenshoe. The proceeds from the earlier equity sale were also used for “general corporate purposes,” including paying down the company’s debt. At the time of the offering, SYRG was pursuing a “superman-type” balance sheet, which would give them a stronger position when considering potential acquisitions, a note from Mike Kelly at Seaport Global said.

Pursuing growth even at current oil prices

In its April corporate presentation, Synergy reported zero outstanding debt pro-forma November 2015, giving it a strong position to pursue acquisitions, should the company decide to use the proceeds from its announced equity raise to add to its acreage.

“We’re looking for opportunity,” Synergy CEO Lynn Peterson told Oil & Gas 360® shortly after the January equity raise.

“We are one of the few oil companies, maybe the only oil company, that doesn’t have any debt at all on the books and [has] cash in the bank. Growing organically is very difficult at these prices. One thing we’re really trying to do is build contiguous blocks of acreage,” said Peterson.

Synergy position in the Wattenberg

Synergy’s last acquisition was for 4,300 net acres in the Wattenberg through a cash and stock transaction with privately held K.P. Kauffman Company, Inc. Synergy paid $78 million in total consideration for 1,200 BOEPD of net volumes in a deal that was 60/40 stock and cash, respectively.

Peterson said SYRG likes to acquire new assets through the use of its stock.

“Nobody wants to sell properties at $30 oil. But being able to say, ‘Okay guys, come join us. You’ve got our currency, and if you believe in the play, and if you believe in what we’re doing, you’ll see your appreciation through the currency,” Peterson told Oil & Gas 360® about acquiring assets with Synergy stock.

The decision to go back to equity markets to raise capital may be a sign Synergy has its sights set on a new target that would prefer cash over stock, however, as the company is again issuing and selling shares to generate cash, which it doesn’t need for debt reduction—contrary to the majority of the industry’s shale drillers.

Increasing reserves and production

Synergy also released guidance today alongside news of its equity offering, showing the company continues to increase the sizes of its reserves.

Based on reserves prepared by the company’s third-party reserve engineer, SYRG increased reserves roughly 16% to 66 MMBOE as of December 31, 2015. The estimated PV-10 value is $438 million, comprised of 64% crude oil and 36% gas.

SYRG also said the company expects 2016 production to reach 11.5 MBOEPD at its midpoint, up about 23% from the company’s average daily production of 8.8 MBOEPD for the twelve months ended August 31, 2015.

Synergy reserves and production growth

Legal Notice