Uinta Basin: Valuation Reset

On November 1, Canadian E&P Crescent Point Energy announced an $861 million acquisition of Ute Energy’s Central Basin (CB) assets in Utah.  This represents Crescents first entry into the basin, and really its first entry deep into the US.  This transaction provides a good valuation reset for other operators in the area:  $BBG, $BRY, and $NFX.  Current Ute production is 7,800 boepd, and when you back out the $700 per acre placed on the acreage, they are paying $124K per producing barrel. 

Crescent Point Energy Operating Areas

Crescent is an E&P that falls under the radar since it only trades on the Toronto Stock Exchange, and has typically only operated in Canada.  However, it pays a hefty $.23 cents per month dividend, which at today’s price of $39.62 produces an annual yield of 6.9%.  The company has low leverage as well with just 10% debt-cap.  The bountiful dividend and monthly payout (think compounded re-investments [12 instead of typical 4]) are attractive, but the Canadians take out 15% for dividend taxes and you end up paying higher commissions to buy on the TSX.  Still, not a bad stock to add to the shopping list if the dividend where to creep higher. 

Bottom line on Uinta: 

  • Valuation has been reset with this M&A deal
  • Interesting to see if CB shale oil / horizontal drilling can become economic
  • Look for other larger independents to enter the play if successfull

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