Triangle Petroleum Corp. (NYSE MKT: TPLM) upped its inventory by 70% in what analysts called a “decent area” of the Williston Basin after it announced two acquisitions totaling 46,100 net acres.
Triangle will pay $120 million for acreage in Williams County, N.D., and Sheridan County, Mont.
Triangle said two separate definitive agreements are in place for the properties and will be fully financed through bank commitments, including a new senior secured second-lien term loan facility.
The assets have 1,175 barrels of oil equivalent per day (boe/d) of current production and 4,450 Mboe of net proved reserves with a PV-10 value of some $110 million based on internal estimates as of April 30.
Gordon Douthat, senior analyst with Wells Fargo Securities LLC, said no detail was provided on future development plans on acreage.
“From well count guidance, it appears that activity on acquired properties will occur subsequent to FY [fiscal year] 2015,” he said.
The acquisitions come at a cheap valuation—about $1,100 per acre—but the properties are largely nonoperated and mostly located outside of core territory, based on analysis by Gabriele Sorbara, analyst with Topeka Capital Markets.
“While TPLM needed a larger acreage position in order to garner a better valuation, we find it difficult for investors to drive shares higher on mostly lower tier nonoperated acreage, especially with the magnitude of the outspend going forward,” he wrote in a May 15 report.
TPLM estimates to have $50 million of cash on hand, $260 million of debt on its $405 million senior credit facility, and $60 million of debt on its senior lien. Following the acquisition, total liquidity is estimated at $195 million, which compares to Sorbara’s fiscal year 2015 outspend of $283.4 million and fiscal year 2016 outspend of $399.5 million.
Sorbara estimated that about a third of Triangle’s acquired acreage is in the core part of Williams County, with about two-thirds in northwestern Williams and southeastern Sheridan, “a lower quality area.”
“Based on our analysis of state production data, the company's core acreage in southwestern portion of Williams County outperforms wells in the acquired acreage in the northwestern Williams County area by more than 50% on a 12 month total production” timetable, he said.
The acquisition is expected to close on June 30.
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