13
Jul
Wrap – Week Ended 07/11/14
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All questions under the wrap will be addressed in the Subscriber Mailbag section of the Monday post.
If you have questions about ZEB please email them to us at zman@zmansenergybrain.com
13
Jul
This entry was posted on Sunday, July 13th, 2014 at 9:25 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
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Is brent at the lowest levels for the year?
July 13th, 2014 at 12:04 pmre 1 – no, not yet:
http://www.barchart.com/charts/futures/SCQ4&style=technical
July 13th, 2014 at 12:19 pmWLL buys KOG at $13.90; good deal for WLL
http://finance.yahoo.com/news/whiting-petroleum-corporation-acquire-kodiak-185700624.html
July 13th, 2014 at 3:21 pmFull color commentary on the KOG acquisition in the Monday post.
July 13th, 2014 at 3:26 pmI wonder if there is a no shop provision in the WLL/KOG deal.
July 13th, 2014 at 4:40 pmKog take under.. Very disappointing.
July 13th, 2014 at 5:01 pmre 6 – it's all stock, the stock is at it's all time highs. I'm not disappointed given the valuation but those that take the view that a premium must be paid in all cases I guess will be. Detailed notes in the morning post.
July 13th, 2014 at 5:04 pmRE 7: I'm looking forward to your comments in the morning. Most M&A deals with attractive assets receive a control premium in a takeover. KOG sold out for a control discount. Maybe there are reasons for it, but with KOG having among the most prime leasehold assets in the Bakken this was unexpected. Sure KOG is selling near all time highs, but so is WLL. I remember when BEXP sold out for a price that appeared to be low, but at least it was a premium to the closing price when announced. This deal is at a discount to Friday's close. Perhaps the market has over-valued KOG's assets and undervalued WLL. By the look of it, KOG's management and Board would agree. If that is the case, then holding WLL (with KOG aboard) should offer more upside appreciation than holding KOG alone. At any rate, I'm eager to read your comments on this deal.
July 13th, 2014 at 6:42 pmre 8 – see, I don't care much about a premium vs the recent price or Friday's closing price, if they are taking stock in the deal, in light of the move the name has had over the last 6 to 12 months. A lot of the good news was already in the name as it's very near its all time high. Just breaking it down, at $13.90, that's $157,600 per 2Qe BOEpd, $35,100 per acre and about $36 per prove BOE. None of those are cheap. So yeah, they didn't get a premium but by taking stock and by having WLL not grossly over pay there's more potential for WLL to spin this well in the morning and take their stock higher in the coming weeks … taking KOG along with them, espeically when they talk about syneriges and Basin diversification for KOG shareholders who will be getting exposure to Redtail. We've owned it for six years now and when I think about where it can go it's with an eye towards forward valuation (TEV/EBITDA), generally a year out, so each year that bar gets higher (unless oil prices retreat substantially). Personally, I'm sad to see them go. $15 or $16 or $18 wouldn't make much difference to me in that regard. We don't own anything in the ZLT however for takeout purposes. We note that the deal makes OAS look expensive on a flowing barrels basis but super cheap on acreage and in line with current levels on a reserves basis. And for TPLM, the deal makes the company look cheap across the board. Anyway, comments and comp table will be in the morning post.
July 13th, 2014 at 7:01 pmre 7,8..appreciate your perspectives. I would have expected a control premium thus my disappointment. I worry the lack of a premium affects the other names in the group as well. It may create some opportunities. Of course, this is a short -term perspective. Longer term Z, I would agree with you. Looking forward to reading your full thoughts tomorrow.
July 13th, 2014 at 7:21 pmre 10 – understood, tune in early as that call is at 8 pm EST and we'll post before it starts and then have running comments.
July 13th, 2014 at 7:22 pmZ 9 in terms of valuing the deal. You say that oas is expensive on a flowing barrels basis and cheap on an acreage basis which of the two metrics is most important.? Ideally cheap on both is ultimately bast but without that which would you be more concerned about. Does this mean that BCEI looks even more attractive as opposed to 0as? tia
July 13th, 2014 at 7:23 pmre 12 – will address tomorrow as we are in public space here.
July 13th, 2014 at 7:23 pmMy thoughts are with the hot money leaving anyway those weak shareholders are motivated sellers. Z;appreciate your thoughts on valuation metrics.
July 13th, 2014 at 7:24 pmre 9 – On Monday can you elaborate on the not owning anything for takeout purposes thought? I'm thinking HK is something that is being built for that purpose but maybe I don't understand the term. thanks.
July 13th, 2014 at 8:15 pmre 15 – sure
July 13th, 2014 at 8:20 pmMore color on the Kodiak deal:
http://dealbook.nytimes.com/2014/07/13/whiting-petroleum-to-buy-kodiak-oil-gas/
July 13th, 2014 at 9:06 pmRE 9, 12: Another metric frequently used for valuation is TEV/Ebitda. At the merger price, Kodiac had a TEV around $6B and a TEV/Ebitda (ttm) of about 8.8x (according to Bloomberg and Yahoo Finance). "That compares with a median of 11.6 times Ebitda for U.S. oil and exploration deals since 2009 valued at more than $1 billion, according to data compiled by Bloomberg." Using that metric, KOG received a price significantly below the median of deals priced over $1B in the last 5 years. This suggests that KOG insiders felt strongly shareholders would benefit more by being part of WLL than staying alone. From the Times article in 17: Mr. Peterson said it was a good deal for Kodiak shareholders. “There’s tremendous upside, that’s why we were comfortable with a stock transaction,” he said. “We wanted to give our shareholders an opportunity to participate in the upside.”
http://www.bloomberg.com/news/2014-07-13/whiting-petroleum-to-acquire-kodiak-oil-for-3-8-billion.html
July 13th, 2014 at 9:59 pmre 18 – I'd like to see the list of deals on that. Deals over $1 B vs deals over $5 B are going to be looked at differently. But it's really about the land and the reserves. If you look at all the Williston Basin deals this is one of the highest price on $/acre and $/ production adjusted acre, and $/proved BOE.
July 13th, 2014 at 10:10 pmOne of the key takeaways for me is that KOG insiders really like the upside potential aligned with WLL more than staying alone and holding out for a higher price from someone else. They took stock in WLL instead of cash as confirmation of that belief. And they were willing to merge at a price that looks favorable to the stock of WLL–which KOG shareholders will now own about 29% of. The combined company has a new TEV of about $17.6B. This compares to CLR with a TEV of about $33B (87.5% higher than the new WLL). Yet the new WLL produced 107,000 Boe from the Bakken in Q1, which is about 10% more than CLR. Of course, CLR has over 1 million acreas in the Bakken compared to new WLL at 855,000 acres and CLR has the Cana/SCOOP with WLL owning "another Bakken inside" of its Niobrara/Red Tail holdings in the DJ Basin. Still, the quality of WLL's Bakken acreage just got a big upgrade to considerably narrow the Bakken differential between it and CLR. WLL has a big potential upside when comparing it with CLR. The growth metrics have been a big differentiator between the two, but now the comparisons may be changing. I'll be very interested in your take on the WLL pro-forma growth metrics for production, reserve growth and ebitda.
July 13th, 2014 at 11:13 pmMonday post will be up at 7:50 EST.
July 14th, 2014 at 6:40 aminvisalign cleaning
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December 20th, 2015 at 6:00 am