Ranger Oil: Bolt-On Acquisitions Add To Its Production
Summary
- Ranger added around 1,000 BOEPD in current production for $64 million in cash via bolt-on acquisitions.
- It also added 17,000 net acres and additional working interest in some of its existing (and in development) wells.
- Ranger is projected to end 2022 with a bit over $300 million in net debt now, before the impact of any share repurchases.
- It has authorized a $100 million share repurchase program.
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Ranger Oil (NASDAQ:ROCC) added around 1,000 BOEPD in production through bolt-on acquisitions, and should still be able to reduce its net debt to a bit above $300 million (before spending on share repurchases) by the end of 2022.
Ranger's Q1 2022 production came in near the high-end of its guidance and allowed it to boost its full-year guidance slightly before the impact of its recent acquisitions. Ranger currently appears fairly priced for a long-term (after 2022) low-$70s WTI oil scenario.
Bolt-On Acquisitions
Ranger announced that it was acquiring three "bolt-on" properties for a total of approximately $64 million in cash. These acquired assets are located at the northern end of Ranger's existing acreage and adds 17,000 net acres to Ranger's portfolio. The acquisitions also will help Ranger develop longer-lateral wells in the area and increases the working interest in some of its existing wells.
Ranger's Acquisitions (rangeroil.com)
The acquired assets are currently producing approximately 1,000 BOEPD (65% oil, 22% NGLs and 13% natural gas). Ranger estimates that the PD PV-10 (at early May strip) is higher than the $64 million purchase price, including the acquired working interest in two wells in process (operated by Ranger) that are expected to turn in line in May 2022.
Ranger notes that the acquisition has a low decline production profile (which typically also correlates with higher-than-average operating costs). It also mentioned that the acreage has "highly economic near-term development opportunities", although I would say that even second-tier acreage is highly economic based on near-term commodity prices.
Q1 2022 Performance
Ranger's Q1 2022 performance was pretty good, as it ended up averaging 37,752 BOEPD during the quarter, including 26,980 barrels of oil per day. This was near the high end of its Q1 2022 guidance for 36,500 to 38,000 BOEPD in total production, including 25,800 to 27,000 barrels of oil per day.
The strong Q1 2022 production performance has allowed Ranger to bump up its full-year guidance while maintaining its D&C capex budget range of $375 million to $425 million in an inflationary environment.
Potential 2022 Outlook
Ranger boosted its oil production guidance for 2022 by 250 barrels per day, citing the strong performance in Q1 2022. Total production guidance was increased by a similar amount, and this does not include production from its recent bolt-on acquisitions.
At current strip of over $100 WTI oil, Ranger is now projected to generate $1.205 billion in oil and gas revenues before hedges, while its 2022 hedges have around negative $200 million in estimated value.
| Barrels/Mcf | $ Per Barrel/Mcf (Realized) | $ Million | |
| Oil | 10,493,750 | $100.00 | $1,049 |
| NGLs | 2,135,250 | $34.00 | $73 |
| Natural Gas | 11,826,000 | $7.00 | $83 |
| Hedge Value | -$200 | ||
| Total Revenue | $1,005 |
This results in a projection that Ranger can generate $333 million in positive cash flow in 2022 at current strip prices, not including contributions from its recent bolt-on acquisitions.
| $ Million | |
| Lease Operating Expense | $76 |
| Gathering, Processing and Transportation | $35 |
| Production and Ad Valorem Taxes | $75 |
| Cash G&A | $34 |
| Cash Interest | $44 |
| Capital Expenditures | $408 |
| Total Expenses | $672 |
Debt And Valuation
Ranger had $586 million in net debt at the end of 2021 and its acquisitions may end up adding around $50 million (purchase price less cash flow) to its net debt by the end of the year. This would leave Ranger with approximately $309 million in net debt at the end of 2022, after factoring in dividend payments. Ranger has also authorized a $100 million share repurchase program that could affect its year-end debt total.
Ranger's estimated value gets bumped to up around $36 per share in a long-term (after 2022) $70 WTI oil and $3.50 NYMEX gas scenario and $39.50 in a long-term $75 WTI oil and $3.75 NYMEX gas scenario. Ranger's relatively strong production performance helps boost its value a bit.
Conclusion
Ranger is expected to end 2022 with a bit over $300 million in net debt after making some bolt-on acquisitions that add around 1,000 BOEPD to its production levels. Ranger's Q1 2022 production performance came in near the high end of its guidance and contributed to it bumping up its full year oil production guidance by 250 barrels per day and its total production guidance by 250 BOEPD.
Ranger currently appears to be fairly priced for a long-term (after 2022) low-$70s WTI oil scenario.
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