A pump jack on WildHorse Resource Development acreage in the upper Eagle Ford Shale in Burleson County, Texas. (Source: Tom Fox/Hart Energy)
WildHorse Resource Development Corp. (NYSE: WRD), one of the largest players in the Northeast Eagle Ford Shale, revealed a series of bolt-on acquisitions, which analysts said increased the company’s footprint at an “attractive” price.
On Sept. 20, WildHorse said it had recently executed and closed two agreements to acquire a combined 20,305 net acres in the Eagle Ford, Austin Chalk and other intervals. The acquisitions included about 39 barrels of oil equivalent per day (boe/d) of net production across Burleson, Brazos, Lee and Washington counties in Texas. The terms and sellers were undisclosed.
The company also added it has leased 10,700 net acres in the Eagle Ford and Austin Chalk year-to-date, net of lease expirations.
As a result of these transactions, WildHorse said it has acquired about 31,005 net acres in 2018 for $43 million. Of the total consideration, about $7.6 million has been recognized on the company’s first- and second-quarter 2018 financial statements.
Assuming $35,000 per flowing on the 39 boe/d net production, analysts with Seaport Global Securities estimate WildHorse’s latest bolt-on increases the company’s Eagle Ford footprint by 8% at an “attractive $1,300 per acre.”
“We’re good with spending slightly above $1,000 per acre to bolt-on to existing acreage or add to working interests in areas with greater than 60% IRR’s,” Mike Kelly, Seaport senior analyst, said in a research note on Sept. 21.
At 418,000 net acres in the Northeast Eagle Ford pro forma for the bolt-ons, WildHorse CEO Jay Graham said the company’s status as the largest player in the region allows it to acquire acreage at “extremely attractive valuations.”
“We are committed to solely consolidating the Northeast Eagle Ford and will continue to prudently add similar acreage where it makes economic sense and adds value to our shareholders,” Graham said in a statement.
Seaport analysts expect WildHorse’s bolt-on acquisitions to have a negligible impact on the company’s leverage metrics and to be easily funded from its credit line.
Further, Seaport’s Kelly said the transactions should also quell fears that WildHorse has been looking to step out of the East Texas Eagle Ford and make a bid for Penn Virginia Corp. (NASDAQ: PVAC).
“Such a deal clearly doesn’t fit with its acquisition criteria and, our opinion, that was made crystal clear in yesterday’s press release,” he said.
Analysts with Tudor, Pickering, Holt & Co. (TPH) said WildHorse’s acreage additions continue the company’s trend of bolt-ons and further its goal of consolidating in the Northeast Eagle Ford.
“We continue to like the equity at its current valuation of 3.4 times 2020 enterprise value/EBITDA and see upside driven by successful spacing results and additional midstream derisking via the upcoming phase two announcement which should detail a third-party long-haul takeaway to cover 100% of WildHorse’s oil production and further improve realizations,” TPH analysts said in a research note on Sept. 21.
Earlier this month, WildHorse announced plans to construct a wholly-owned in-field oil and produced water gathering system. The project will be constructed and operated by the company with completion expected in mid-2019.
In the same announcement, WildHorse also said it was currently evaluating proposals for the construction of a third-party long-haul pipeline, the second phase of the midstream infrastructure project. Upon completion, the company expects to have the ability to transport 100% of its oil volumes on pipeline to premium Gulf Coast markets, including for crude exports.
Emily Patsy can be reached at epatsy@hartenergy.com.
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