Untitled Document
Untitled Document

Jefferies: Carrizo Oil & Gas Niobrara JV in line with expectations, Gulf Coast deal ‘underwhelming’

Carrizo Oil & Gas Inc.(NYSE: CRZO) has entered into a Niobrara joint venture with two Delhi, India-based energy companies and has completed the sale of virtually all of its Gulf Coast assets.

The deal builds on the Houston-based company's previously announced plan to monetize certain dry gas assets in an effort to focus on its liquids-rich resources. In March, the company agreed to sell a portion of its Barnett Shale properties to an Atlas Resource Partners subsidiary for $190 million.

Niobrara JV
In the Niobrara, the Houston-based oil and gas exploration and production company has entered into a JV agreement with subsidiaries of OIL India Ltd. and Indian Oil Corp. Ltd.

OIL and Indian Oil Corp. have together acquired an undivided 30% non-operated interest in substantially all of Carrizo's assets and operations prospective for Niobrara Formation oil development located primarily in Weld and Adams Counties, Colorado for approximately $82.5 million. Included in the transaction is the sale of approximately 18,100 net mineral acres and approximately 555 boe/day (75% oil) of production from 24 gross currently producing Carrizo operated wells.

The $82.5 million sale price for 30% of Niobrara implies value of $275 million for gross value, in line with the $280 million estimated by Jefferies & Co. Inc. analysts last week. “Actual gross oil production of 1,400 bbls/d higher than our 1,200 bbls/d estimate. If we value oil production at $100k per flowing bbl, would imply a value of $135mm for the 61,500 gross acres, or $2,200/acre. As expected, proceeds were 50% cash / 50% carry,” said the analysts in a note to investors Thursday morning.

Carrizo is receiving $41.25 million in cash and an additional $41.25 million in the form of a drilling carry that will be applied to fund a portion of Carrizo's share of future Niobrara development costs—an appropriate use of capital as it will bridge the 2012 funding gap, while the carry will enable a second rig to be added to the Niobrara in 2013, noted Jefferies.

Carrizo's President and CEO, S.P. "Chip" Johnson, IV, commented, " We estimate that the acceleration in development activity net to Carrizo from the additional rig will offset our future lower working interest and will result in an increase in Niobrara oil production net to our shareholder's interests over the course of 2013 compared to our pre-JV internal estimates."

Gulf Coast sale
At the same time, the exploration and production company said that it has completed the divestiture of substantially all of its legacy producing properties along the onshore Gulf of Mexico located primarily in Texas and Louisiana for approximately $19.5 million cash consideration. Net production from the sold properties is approximately 120 bbls/day of oil/condensate and 5,000 mcf/day of high BTU gas.

Jefferies analysts see the deal value as low for legacy assets, but the cash will also help to “incrementally bridge 2012 funding gap.”

The Jefferies’ estimated valuation of $3,400 per flowing mcfe is “underwhelming,” and may be a reflection of the assets’ “gassy nature (87% gas), expected declines, and lack of upside” of the assets.

Related Articles

Construction of Seaway Pipeline loop completed

07/07/2014 Enterprise Products Partners LP and Enbridge Inc. report that the 512-mile loop of the Seaway Pipeline system from Cushing, Oklahoma, to the Jones Creek storage and terminal facility near Freeport,...

Ecopetrol agrees to participate in exploration of two blocks in Angola

07/07/2014 Ecopetrol SA (BVC: ECOPETROL; NYSE: EC; TSX: ECP) reports that, as part of its strategy of diversifying and strengthening its international exploration portfolio, an agreement has been reached with...

Dejour closes Kokopelli joint venture

07/01/2014

Dejour Energy Inc. has formed a joint venture with a private US-based E&P company to develop its core Kokopelli leasehold in the Piceance Basin region of Colorado.

PetroQuest enters into joint venture

07/01/2014 PetroQuest Energy Inc. has entered into an oil-focused joint venture in Louisiana with Midstates Petroleum Co. Inc. Under the terms of the JV, the company has acquired a 50% interest in Midstates' ...

Pacific Radiance, CSP set up JV to serve Mexico's OSV sector

06/26/2014 Singapore-listed Pacific Radiance Ltd. reports that its indirect subsidiary, Radiance Offshore Holdings Pte. Ltd., has entered into a joint venture agreement with Consultoría y Servicios Petroleros...

More Oil & Gas Financial Articles

Construction of Seaway Pipeline loop completed

Mon, Jul 7, 2014

Enterprise Products Partners LP and Enbridge Inc. report that the 512-mile loop of the Seaway Pipeline system from Cushing, Oklahoma, to the Jones Creek storage and terminal facility near Freeport, Texas, is mechanically complete.

Ecopetrol agrees to participate in exploration of two blocks in Angola

Mon, Jul 7, 2014

Ecopetrol SA (BVC: ECOPETROL; NYSE: EC; TSX: ECP) reports that, as part of its strategy of diversifying and strengthening its international exploration portfolio, an agreement has been reached with Statoil to acquire a 10% participation in the blocks 38/11 and 39/11 in the Kwanza basin, located offshore Angola.

Dejour closes Kokopelli joint venture

Tue, Jul 1, 2014

Dejour Energy Inc. has formed a joint venture with a private US-based E&P company to develop its core Kokopelli leasehold in the Piceance Basin region of Colorado.

PetroQuest enters into joint venture

Tue, Jul 1, 2014

PetroQuest Energy Inc. has entered into an oil-focused joint venture in Louisiana with Midstates Petroleum Co. Inc. Under the terms of the JV, the company has acquired a 50% interest in Midstates' Fleetwood project for an aggregate purchase price of $24 million.

Pacific Radiance, CSP set up JV to serve Mexico's OSV sector

Thu, Jun 26, 2014

Singapore-listed Pacific Radiance Ltd. reports that its indirect subsidiary, Radiance Offshore Holdings Pte. Ltd., has entered into a joint venture agreement with Consultoría y Servicios Petroleros SA de CV, a Mexican shipping company, to jointly incorporate a Mexican corporation to be named CR Offshore SAPI de CV (the CRO) with the initial capital of $406,980 (MX$ 5,320,000).

Most Popular

Oil & Gas Jobs

Search More Job Listings >>
Subscribe to OGFJ