I have to spend some time understanding the acreage, but from first glance, what's not to like?
First, I think Dion Hatcher will turn out to be an excellent CEO. He ran the North American operation so he has his fingerprint all over this acquisition.
They gave huge hints that they were looking to add assets in NA. It was just a matter of time and opportunity. They wanted to be able to extend their RLI. From what I can tell, VET has the highest RLI in its history.
Does anyone think the 36% purchase of Carrib was anything but brilliant? It will be interesting to see the cash flow exchange at closing. The increase in European gas is turning out to be a huge winner. They now have a window of European gas production that will allow them to develop CEE over the next 4-5 years for replacement purposes. They could have decades of exploration and development in CEE. The first gas should be H1 of 2023.
Today's deal extends their development opportunities by decades. Most of the land they purchased is undeveloped. If the well results at Mica are repeatable, they will have a huge winner. What's not to like about wells that payout in 6-7 months with PV10 value of 23+ million on 5.8 million in total costs.
Yes, this will delay dividends by maybe 6 months. Who cares? They just potentially locked in an additional $1.25 dividend for 20 years.
Because of the huge cash flow from Carrib and the likelihood that it pays out by closing, today's deal is easily paid out from cash flow this year. It still looks to me that they could end the year with less than 500 million in debt.
With today's deal and the CEE properties, VET is looking at a 20-year production window where they will print money at 75 WTI, 4 AECO, and 12 European gas.
Of course, because so many of the properties bought today are undeveloped, there is exploration risk. If they spent 2 years looking and doing analysis, I have to believe that Hatcher feels very strongly that the play works.