Oil and liquids-rich natural gas explorer Athlon Energy Inc. (ATHL) has agreed to acquire certain producing and undeveloped properties spread over 23,500 net acres in northern Midland basin from five different sellers for a combined $873 million in cash.
The market reacted positively to the news, which was announced after market hours on Tuesday, Apr 8. Shares of Athlon Energy ended at $37.94 on the next day – up 13.1% from Tuesday’s close.
The to-be-bought assets in the Texas counties Martin, Upton, Andrews and Glasscock – adjacent to Athlon Energy’s existing fields in the region – with an estimated 250 million oil-equivalent barrels (MMBOE) in reserve potential and will add 4,800 BOE (67% oil) to the Fort Worth, TX-based outfit’s daily production. The properties would also add 425 ‘highly prospective’ horizontal drilling locations to Athlon Energy’s inventory.
The potential acquisition – which is likely to be sealed by June subject to customary closing conditions – is expected to be immediately accretive to Athlon Energy’s earnings and cash flows. Importantly, the addition of the acreage will boost growth prospects of the company in the Permian Basin’s liquids-rich Midland region, one of the country’s largest onshore oil plays. While Athlon Energy already possesses significant development opportunities in the region, the transaction will further increase the company’s total identified drilling locations.
Athlon Energy, which went public in Aug last year, is an independent exploration and production company engaged in the acquisition, finding, and development of unconventional onshore oil and gas properties. The company’s operations are concentrated primarily in the Permian Basin in West Texas.
With holdings of around 100,000 net acres in the eastern portion of the Permian Basin and approximately 30 years of vertical drilling inventory, Athlon Energy’s asset portfolio is primed for high production growth and peer-leading returns.
Athlon Energy currently retains a Zacks Rank #3 (Hold), implying that it is expected perform in line with the broader U.S. equity market over the next one to three months.
However, some better-ranked domestic upstream energy stocks include Range Resources Corp. (RRC), EOG Resources Inc. (EOG) and Miller Energy Resources Inc. (MILL). While Range Resources holds a Zacks Rank #1 (Strong Buy), EOG Resources and Miller Energy both carry a Zacks Rank #2 (Buy).
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