Once this deal closes...I haven't looked at the acquisition deck lately but iirc the company will have 2.5 billion in debt, 800 million outstanding shares and 1 billion fcf at 75 wti.
Cpg and wcp both got punished for taking on debt to acquire. No different here.
They set the debt target at 1.5B so it's going to take 2 years at 75 wti to reach that target. There's roughly 100 fcf per each additional 5 buck wti increment so there's a lot of torque on wti pricing
I believe once the deal closes and we start seeing regular monthly decks and combined reporting that the upside will be more clear. I also think there are some distinct advantages to having all the Eagle Ford production starting with the wti pricing but also the ability to deploy capital north or south. It's also my understanding that they believe they can apply their operational knowledge to the ranger assets and lower production costs.
So where does that leave us? 2 years at 75, that's 2 billion in fcf. Half to shareholders half to debt. That gets you to the debt target of 1.5 billion. Along the way, there's 1 billion returned to shareholders. Very significant buybacks.
We hit the debt target, shareholder returns jump to 75%, there's less than 700 million shares out, and there's 1 billion in fcf per share. That's about 1.40 per share.
This deal is immediately accretive to cash flow per share. Just wait. No need to flip, no need to listen to the noise. If wti stays in the mid 70s, we're gold.
What i don't have a good feel for is whether our new ceo is a serial acquirer. He has a bit of a record for that. I'm prepared to watch this unfold, but I'll be on IR with my thoughts on further acquisitions.