Earthstone Energy, Inc.
ESTE
recently completed the acquisition of a privately-held oil and gas exploration and production company, Independence Resources Management, LLC. The transaction was valued at $182 million, comprising $131.2 million in cash and 12.7 million shares of Class A common stock of Earthstone. The shares were valued at $50.8 million.
Notably, the transaction was closed just after three weeks of the announcement. Independence Resources Management’s low-cost and high-margin assets are expected to enhance Earthstone’s portfolio. Moreover, the deal is expected to support Earthstone’s free cash flow generation capacity.
Earthstone operates in the Midland Basin, wherein production averaged 8,780 barrels of oil equivalent per day (Boe/d) in third-quarter 2020, of which 66% was crude oil. It had around 4,900 core net acres in the Midland and Ector counties. Moreover, in the eastern Midland Basin, the company had 38,500 net acres. The move of adding the complementary Midland Basin properties from Independence Resources Management is expected to boost the acquirer’s greater Permian Basin production capacity and adjusted EBITDAX by 50%.
Additionally, the acquisition might have added 70 high-quality undeveloped horizontal locations to Earthstone’s portfolio. Potential Jo Mill, Wolfcamp B and Wolfcamp D locations were also included in the transaction. Pro-forma third-quarter production for the combined entity is expected to jump 52%. Importantly, the acquisition was expected to have minimal impact on Earthstone’s leverage.
Price Performance
The company’s shares have jumped 106.9% in the past three months compared with a 54.6% rise for the
industry
.
Zacks Rank & Other Stocks to Consider
Earthstone currently has a Zacks Rank #2 (Buy). Some other similar-ranked players in the energy space include
TC PipeLines, LP
TCP
,
Suncor Energy Inc.
SU
and
Summit Midstream Partners, LP
SMLP
. You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
TC PipeLines’ bottom-line estimates for 2021 have increased nearly 5% in the past 60 days.
Suncor’s sales for 2021 are expected to increase 18.2% year over year.
Summit Midstream’s bottom-line estimates for 2021 have increased 12.4% in the past 60 days.
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