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04-Mar-2013
Morning Report\

Sundance Energy Ltd (SEA.ASX, $1.07/sh, Mkt Cap $296m) – Merger nearing completion, proximal results reinforce quality of acreage – TRADING BUY PT $1.60/sh

Today’s Top Picks.

Sundance Energy Ltd (SEA.ASX, $1.07/sh, Mkt Cap $296m) – Merger nearing completion, proximal results reinforce quality of acreage – TRADING BUY PT $1.60/sh

•Sundance Energy merger with fellow US focussed Texon Energy is in the final throes of being completed with both TXN shareholders and Federal Court approving the merger last week.

•To recap, SEA proposed to merge with TXN, whose primary asset is its company operated 7,400 net acres along the oil condensate fairway in the prolific Eagle Ford basin in Texas USA. TXN shareholder will receive one share in SEA for every two TXN shares, which based on SEA’s last trading price of $1.06/sh will imply a market capitalisation of $427m and an EV of ~$290. The final key dates in relation to the approval of the implementation are outlined below:

­ 08.03.13 - Implementation date and

­ 14.03.13 - Commencement of trading of new Sundance shares.

•The merger will result in a mid-cap (~$420m) US focused O&G company, with established and growing production (~3,000 boe/pd FSBe), significant funding capacity (~$150 cash, $85 undrawn debt facility) and exposure to a diversified suite of assets across the leading US basins which include the Eagle Ford, Mississippian, Bakken and the Niobrara.

•Results from operators proximal to SEA’s acreage in the Eagle Ford and Mississippian, continue to reinforce our view of the quality acreage the company holds. In the Mississippian Logan county, where SEA have ~20,000 net acres, is shaping up to be a sweet spot of this play. US based, Osage exploration recently announced today the average 30-day initial production on its Krittenbrink 1-1H horizontal Mississippian with the average 30-day initial production rate of 494 BOE with a product mix composed of approximately 88% crude oil and 12% high-BTU natural gas.

•While in the Eagle Ford Swift Energy released production numbers for 4 wells coming online in McMullen county, this is the same county where TXN 7,400 net acres are located. The wells have been completed and tested with initial production rates in excess of 1,000boe/d, with oil mix > 70% and importantly tested on 50 acre spacing.

•We value SEA at $1.60/sh based on our assessment of the risked NPV across each of its project, we forecast an CY13 exit production rate of ~4,000 boepd

•TRADING BUY $1.60/sh
http://www.fostock.com.au/announcements/sundance-energy-ltd-sea-asx