Veren Inc T.VRN

Alternate Symbol(s): VRN

Energy Oil & Gas E&P

Veren Inc. is a Canada-based oil producer with assets in central Alberta and southeast and southwest Saskatchewan. The principal activities of the Company are acquiring, developing and holding interests in petroleum and natural gas properties and assets related thereto through a general partnership and wholly owned subsidiaries. Its core operational areas include Kaybob Duvernay and Alberta Montney, Shaunavon and Viewfield Bakken. Its Kaybob Duvernay is situated in the heart of the condensate rich fairway, Central Alberta, which provides low risk drilling inventory. Its Alberta Montney assets sit adjacent to its Kaybob Duvernay lands, possessing similar resource characteristics including pay thickness and permeability in the volatile oil fairway of the reservoir. Its Shaunavon resource play is located in southwest Saskatchewan. The Viewfield Bakken light oil pool is located in Saskatchewan.

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Post by retiredcfon Oct 08, 2024 8:35am

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Post# 36257508

TD Notes

INDUSTRY UPDATE

CNQ/CVX READ-THROUGHS FOR VRN & WCP

THE TD COWEN INSIGHT

Chevron (CVX-US, US$151.12, Hold, Gabelman) announced it divested its Cdn assets to Canadian Natural Resources (CNQ-T, $49.81, Buy, Hulshof) for C$8.8bln. The package included the widely marketed/expected sale of CVX's Kaybob Duvernay. Beyond implications for CNQ (here) and CVX (here); there are read-throughs for the incumbents in the Kaybob Duvernay - Veren (VRN-T, $9.13, Buy) and Whitecap (WCP-T, $11.17, Buy).

What Value Could CNQ Have Assigned to the Duvernay Assets? Given the mix of assets acquired, including difficult to value assets (Quest CCS, Scotford...), this exercise lacks precision; however, we believe it to be an instructive datapoint for those evaluating either Veren or Whitecap. If we assume CNQ attributed C$6.2bln for the Athabasca Oil Sands Project (AOSP) and C$0.6bln for the remaining non-Duvernay assets, this would imply a value of C$2bln for the Kaybob Duvernay (~40 mBOE/d; 245,000 net acres) - implying a metric of $50,000/BOE/d.

What Does This Imply for Kaybob Duvernay Value within Veren and Whitecap?

Implied Value to Veren:

Veren's Duvernay production is currently ~50 mBOE/d, or ~25% of total. VRN holds 400,000 net acres in the region. Based on the implied metrics of this transaction, we estimate implied value of $2.5bln for Veren's Duvernay or ~30% of current EV.
Based on VRN's current EV/BOE/d metric of ~$47,000 (Q3/24E), we estimate the CNQ/ CVX metric implies the market is valuing the Duvernay within the portfolio at $2.35bln. This implies upside of $150mm ($0.24/shr) or a 3% increase to the current share price.

Implied Value to Whitecap:

WCP is currently producing ~20 mBOE/d in the Duvernay or ~12% of total. Whitecap holds 72,000 net acres of Duvernay at Kaybob. The transaction metrics outlined above imply a value of $1.0bln for Whitecap's Kaybob Duvernay or 13% of current EV.
Based on WCP's EV/BOE/d metric of ~$45,000 (Q3/24E), we estimate the CNQ/CVX metric implies the market is valuing the Duvernay within the portfolio at $900mm. This implies upside of $100mm ($0.17/shr) or a 2% increase to the current share price