RSP Permian: Paying Top Prices For Top Acreage With New Investors' Money
Richard Zeits • 10 Comments
Richard Zeits • 10 Comments
Fri, Mar. 11, 3:53 PM
- EP Energy (EPE -3.1%) is a rare energy loser today as Goldman Sachs downgrades shares to Sell from Neutral with a $4.50 price target, based on a lack of differentiated growth relative to other oil levered companies and a weakening balance sheet, resulting from attractive hedges rolling off at year-end 2016.
- But Goldman, while it forecasts sharply lower U.S. oil prices over the coming weeks, also sees "a path emerging" for a recovery to $55-$60/bbl in 2017 to restart the U.S. shale machine, and raises its coverage outlook for the E&P sector to Attractive from Neutral while recommending investment in "secure shale productivity winners and the next rung stocks.”
- The firm upgrades Carrizo Oil & Gas (CRZO +10.4%) to Buy from Neutral with a $37 price target, expecting CRZO to exit 2017 at a manageable 3.6x net debt/EBITDA with the potential for non-core asset sales to aid in further deleveraging.
- RSP Permian (RSPP +7.9%) also is raised to Buy from Neutral, with a $34 target, as Goldman expects a re-acceleration of drilling activity in 2017 to drive improvement in the company’s leverage metrics and easing investor concerns.
- Oasis Petroleum (OAS +4.4%) is upped to Neutral from Sell with a $7.25 price target, as the firm believes that a cyclical recovery in oil prices would ease investor concerns over the company’s leverage.
- Earlier: Anadarko Petroleum upgraded to Buy at Goldman Sachs
Thu, Feb. 25, 3:11 PM
- RSP Permian (RSPP +9.3%) is upgraded to Sector Outperform from Sector Perform with a $27 price target at Scotia Howard Weil, after posting better than expected Q4 earnings.
- The firm believes RSPP will continue to meaningfully outperform the group amid weak commodity pricing thanks to a low cost operating structure and enjoy upside if the commodity environment turns around, given the company's minimal hedging.
- RSPP also offers nice optionality in 2017, when the company could keep 2016 production levels flat at a strip environment with little need to tap its revolver or grow meaningfully in the event of rising commodity prices.
Dec. 9, 2015, 10:36 AM
- Concho Resources (CXO +2.3%) and Pioneer Natural Resources (PXD +4.3%) are named J.P. Morgan's top large-cap picks among E&P companies focused on the Permian Basin, which the firm says is positioned at the low end of the U.S. tight oil cost curve and thus poised to benefit from efficiency and productivity gains.
- CXO boasts a deep inventory of high rate of return locations in the Delaware Basin; given the company's success there, the firm sees the potential for a "positive rate of change" in the Midland Basin.
- Even though PXD has lagged its Permian peers over the past 12-18 months on a weaker capital efficiency metric, the firm expects the company to realize a positive turn in capital efficiency along with differential oil growth to drive outperformance.
- Parsley Energy (PE +4.2%) and Diamondback Energy (FANG +4.4%) are JPM's top small- and mid-cap picks; Cimarex (XEC +1.7%), Energen (EGN +1.8%) and RSP Permian (RSPP +2.6%) are rated Neutral, while Laredo Petroleum (LPI +4.7%) is tagged with an Underweight rating.
Dec. 2, 2015, 3:59 PM
- Diamondback Energy (FANG -1.8%) and Parsley Energy (PE -3.2%) are initiated with Buy ratings, and RSP Permian (RSPP -3.4%) is upgraded to Buy from Hold, at Deutsche Bank, although the stocks are snowed under by today's broad losses in energy sector.
- Deutsche Bank views FANG as one of the best positioned producers in the Permian Basin, complete with top-tier margins, growth, inventory, and liquidity; "It’s all systems go for FANG’s returns focused development program to continue generating peer-leading results," the firm writes.
- PE recently posted 52-week highs but the firm says it is well positioned to remain the fastest growing company in its oil-focused producer group "while generating strong returns from an enviable Wolfcamp position that is still in the early stages of horizontal development."
- The firm says RSPP offers the best combination of core acreage, debt adjusted growth and margins among mid-cap Permian focused producers and has executed its multi-year growth plan with minimal leverage, and it likes RSPP’s leverage to an improving crude outlook as it remains mostly unhedged in 2016.
Oct. 7, 2015, 8:58 AM
- RSP Permian (NYSE:RSPP) -2.9% premarket after agreeing to acquire acreage and oil and natural gas producing properties in Texas' Midland Basin for ~$137M.
- The properties include 86 net horizontal drilling locations and 25 producing wells with average net production of ~1,900 boe/day in August.
- To help fund the deal, RSPP launches a public offering of 6M common shares, with an underwriters option to purchase up to an additional 900K shares.
- Also, RSPP expects Q3 production to average 23.5K-24K boe/day (~75% oil), a 110%-114% Y/Y increase and an 18%-21% Q/Q growth rate.
Apr. 15, 2015, 2:56 PM
- The oil price recovery may not be as strong as expected, Goldman Sachs says as it recommends buying stocks that do not need a V-shaped rebound such as Diamondback Energy (FANG +2.2%), Rice Energy (RICE +5.9%) and RSP Permian (RSPP +3.6%).
- Goldman expects the $55-$65/bbl WTI crude price level at which producers begin adding rigs ultimately will surprise the market and cause prices to stagnate at sub-$70 levels, so instead of positioning in high beta producers, hoping to capitalize on the sector’s historic 70%-80% correlation with the commodity, the firm recommends gaining exposure to low-cost E&Ps capable of strong growth absent a commodity recovery.
- Goldman tags stocks that are more dependent on further gains in oil prices, such as Denbury Resources (DNR +7.3%), Oasis Petroleum (OAS +3%) and SandRidge Energy (SD +5.8%), with Sell ratings.
Mar. 18, 2015, 9:12 AM
Mar. 17, 2015, 5:38 PM
Mar. 17, 2015, 4:40 PM
- RSP Permian (NYSE:RSPP) -3.5% AH after announcing a public offering of 5M common shares and 4M common shares by certain selling stockholders, with respective underwriters options to purchase up to an additional 750K and 600K shares.
- RSPP plans to use the proceeds to repay all outstanding borrowings under its revolving credit facility and for general corporate purposes, which may include funding its drilling and development program and future acquisitions; RSPP will receive no proceeds from the sale by the selling stockholders.
Dec. 2, 2014, 3:13 PM
- Apache (APA -1%), Bill Barrett (BBG -5.6%) and Laredo Petroleum (LPI -4.9%) are downgraded to Neutral from Buy at Mizuho, as the firm lowers its crude oil price deck and views OPEC's decision not to cut production as a structural shift in crude oil markets.
- Although the current excess supply/weak demand situation will be resolved gradually, market fundamentals will increasingly drive crude prices in a ~$70/bbl world, the firm says; in the E&P space, it prefers APC, MRO, FANG, RSPP and RICE.
Sep. 29, 2014, 12:26 PM
- Encana’s (ECA +2.3%) takeover of Athlon Energy (ATHL +24.6%) is good news for Diamondback Energy (FANG +2.3%) and Energen (EGN +2.2%), according to analysts at Sterne Agee.
- The acquisition implies a value of $98/share for FANG, Sterne says, based on FANG's 85K net acre leasehold position, estimated 19.8K boe/day of Q3 production, $585M of assumed debt, and a $1.7B market value for the Viper Energy Partners (NASDAQ:VNOM) units it owns.
- The firm sees even more upside for EGN, as ECA’s price implies a value of $102/share for EGN, based on 180K net acres across both sides of the Permian Basin, 48K boe/day of Q3 Permian Basin production, 132M cfe/day of Q3 San Juan Basin, and $835M of pro forma net debt as of Sept. 30.
- Permian producers Laredo Petroleum (LPI +5%), Parsley Energy (PE +5%) and RSP Permian (RSPP +4.8%) also are higher following the acquisition news.
Jul. 25, 2014, 9:48 AM
- RSP Permian (RSPP -1.8%) announces agreements with multiple sellers to acquire undeveloped acreage and oil and gas producing properties located in Texas' Midland Basin for a total of ~$259M.
- Aggregate current net production is ~1,106 boe/day (74% liquids), with 13 vertical wells drilled to date .
- RSPP plans to fund the deals via a combination of borrowings and potential equity market transactions.
Jul. 17, 2014, 10:59 AM
- RSP Permian (RSPP +4.1%) reports strong Q2 production growth of 15% Q/Q and 43% Y/Y to 10,714 boe/day, and raises its 2014 production outlook to a range of 11.5K-12K boe/day.
- Says it contracted the fifth horizontal drilling rig and finalized terms on a sixth horizontal rig during Q2, which are expected to arrive in late Q4 2014 and mid-Q1 2015 respectively.
- Howard Weil raises its target price on the shares to $42 from $38.
Jul. 3, 2014, 12:11 PM
- RSP Permian (RSPP -2.5%) is downgraded to Neutral from Buy at UBS, citing the 57% rally since the January IPO even while raising its price target for the stock to $34 from $30.
- UBS says RSPP offers compelling long-term production growth and resource expansion potential, but it is looking for more operated data and a longer execution track record.
- RSPP's first Lower Spraberry and Wolfcamp B wells should come online in Q3, but early industry results have been lackluster, UBS says, while potential accretive acquisitions in the Permian Basin could compress valuation and enable RSPP to gain critical mass to maximize efficiency gain, boosting NAV.
RSP Permian, Inc. is an independent oil and natural gas company, which focuses on the acquisition, exploration, development and production of unconventional oil and associated liquids-rich natural gas reserves in the Permian Basin of West Texas. The company was founded in October 2010 and is... More
Sector: Basic Materials
Industry: Oil & Gas Drilling & Exploration
Country: United States
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