Well results are far more reassuring than Midstream sale. The $110 million is a bit misleading as it isn't being paid for what's in the ground but instead $60 million is future kickback over 4 years if certain volume commitments are made. Normally those payments are negotiated as a reduction to ongoing gathering costs rather than considered part of the sales price. Meanwhile without any declaration as to the fees they'll be paying for that throughput it is hard to state with confidence that this will have little impact on EBITDA.
Well results look great though. Great IPs, good cost control. Their acreage is looking more valuable every day.
With regard to their water system, they don't appear to have any material third party revenues and the revenues they charge themselves are already netted back in the opex assumptions used to calcluate their reserve PV-10. It certainly has upside value if the basin gets active again but $200MM in incremental value seems difficult to justify. Again, where does that number come from?
They ran about $20MM in G&A last year (excluding equity grants). I'm giving them credit that they have more cutting to do and get down to a run rate around $13MM per year which discounts back to around $100MM PV-10. Do you think I'm being too generous?
Why is this a buy? their leasehold is pretty much PUDded up. PV10 at SEC pricing ($52 oil and $275 gas) is $500MM. Add -$100MM for the PV of their corporate overhead and -$500MM for debt and you end up saying that the market is pricing in $200MM in option value. But for what??