The deal and the assets are described in a ROTH Capital Partners report.
ROTH Capital Partners analyst John White reported that Contango Oil & Gas Co. (MCF:NYSE.MKT) agreed to acquire the assets of White Star Petroleum for $132.5 million.
The assets include production of 15,000 barrels of oil equivalent per day (15,000 boe/d) and 20 million barrels of oil equivalent of Proven Developed Producing reserves and 315,000 net acres in the STACK play, the general Anadarko Basin and the Cherokee Basin, in Oklahoma. The amount of total reserves was not disclosed.
White highlighted that this is a "very large acquisition" by Contango. Adding production from the White Star assets to Contango's existing production (5,482 boe/d) would result in estimated total production of about 21,800 boe/d.
It's unknown whether the oil and gas properties Contango is acquiring are nonconventional or conventional or a combination thereof, White noted but added that ROTH suspects all are conventional and mature. "Compared to predominately shale play metrics, the properties are being acquired on a very inexpensive valuation," he added. "Our coverage of predominately shale play companies recently traded at a median flowing boe/d of $36,084."
ROTH has a $1.45 per share target price on Contango, whose current share price is around $2.61. "Although the shares are at a level which fits ROTH's Sell rating definition, we rate the shares Neutral while we await more details on the recently announced acquisition," White explained.
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Disclosures from ROTH Capital Partners, Contango Oil & Gas Company, Flash Note, September 27, 2019
Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
ROTH makes a market in shares of Contango Oil & Gas Company and as such, buys and sells from customers on a principal basis.
Shares of Contango Oil & Gas Company may be subject to the Securities and Exchange Commission's Penny Stock Rules, which may set forth sales practice requirements for certain low-priced securities.
ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months.