In a June 27 research note, ROTH Capital Partners analyst John White reported that W&T Offshore Inc.'s (WTI:NYSE) proposed acquisition of assets from ExxonMobil for $200 million is "very positive."
Those assets include oil and gas producing properties in the eastern Gulf of Mexico that generated $70 million in operating cash flow in 2018 along with related onshore processing facilities.
White highlighted that in terms of benefits of the deal to W&T Offshore, the acquisition will nearly double its Proven reserves from 84,000,000 barrels of oil equivalent (84 MMboe) to 158 MMboe. It will boost its pro forma production by about 59%, to 53,149 barrels of oil equivalent (boe). Also, the properties to be acquired will offset W&T Offshore's Fairway field in offshore Alabama.
Because W&T Offshore's management team has successfully executed this acquisition strategy several times in the past, White noted, it likely will "be able to lower operating costs, add synergies and increase production and reserves" with this transaction.
The analyst also pointed out that the acquisition metrics are "very favorable," at $2.70 per boe or $0.45 per thousand cubic feet equivalent (Mcfe) on Proven reserves and $10,100 flowing boe per day or $1,684 flowing Mcfe per day. "The median figure of our coverage on flowing boe per day is $35,000," he indicated.
W&T Offshore will fund the acquisition with cash on hand, $86.1 million, plus the bank revolver, up to $229 million available, both figures accurate as of March 31, 2019, White wrote.
ROTH has a Buy rating and a $9.50 per share target price on W&T Offshore. The company's current share price is around $4.96.
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Disclosures from ROTH Capital Partners, W&T Offshore Inc., Flash Note, June 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 W&T Offshore, Inc. and Callon Petroleum Company and as such, buys and sells from customers on a principal basis.
Shares of W&T Offshore, Inc. 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.
