Longview Oil Corp LGVWF

WCP morning deal

[Nawaralsaadi]

Whitecap acquisition this morning of 6500 barrels from Imperial Oil this morning for $692m is quite interesting, the assets are currently producing 6500 barrels (83% Oil & NGLs) declining at 16% (a sizable portion is on water flood), WCP is paying the following metrics:

$106.6K per flowing 2014
$19.15 per proven barrel
$14.15 per P+P barrel
6.9 CF multiple (based on an estimated $100m CF for 2014, the full year number is derived from the CF numbers provided by WCP for the May to December 2014 period).
 
It is worth noting that those assets have a higher operating netback ($52- 2014) than LNV’s assets ($38 – 2014), thus considering the slower decline rate and higher netbacks it is reasonable to expect a higher multiple being paid for those assets, but this deal is quite indicative of the interest exhibited by dividend paying companies in buying slow decline oil weighted assets.
 
It is also worth noting that WCP is projecting a lowering of the operating costs of the acquired assets from $17.8 to $13 through cost efficiencies, this is a consequential reduction. Once LNV is acquired I expect the buyer to benefit from a sizable improvement in operating costs as well due to operating synergies and better cost management, this type of upside is often neglected when analyzing the value of LNV’s assets to a buyer.  
 
Regards,
Nawar