Raging River Exploration Inc (TSE:RRX) (OTCMKTS:RRENF) pounces on private energy company to make opportunistic acquisition.
Raging River Exploration just acquired a privately held company – Anegada Energy Corp. – with 2,750 barrels of oil per day equivalent from the Viking formation, which is typically shallow and in the case of Anegada, 58 percent light sweet. They paid $126 million in stock and the assumption of $30 million in net debt held. That equates to $45,645 per flowing barrel, which is about two thirds of what the price per flowing barrel would be for similar product with much higher oil price.
Operating netbacks on the acquisition are $21.50 per boe, but that is based on Raging River’s forecast of WTI at US$42.50 per bbl with the exchange rate fixed at $0.74. I don’t know about you, but I find those numbers a little rosy to say the least.
But still, the acquisition makes sense, especially since Anegada has proved plus probable reserves of 10 million boe, again at 58 percent Viking light oil. If oil prices stabilize above US$45 a barrel, it will be wildly successful. If they persist below $40, the numbers will need to be adjusted downward.
That being said, Raging River’s strategy has been to “prudently manage our balance sheet and maintain significant per share growth while establishing an extensive drilling inventory. Pro forma the Acquisition, our drilling inventory of approximately 3,800 locations (approximately 76% unbooked) is expected to provide stable per share growth for in excess of 10 years.”
So is Raging River a buy? For me, no. The singed fingers from mining – especially gold and silver – are still acute reminders of how unpredictable commodity prices can be. And let’s not forget, with the abandonment of Zero Interest Rate Policy in the U.S. next week (theoretically), the worst may not be over.
Oil could still fall as low as $25 a barrel if certain macro-economic influences persist and/or worsen.