When it comes to valuations you need to make sure you are comparing apples with apples.
In regards to the RedBluff / Bricktown energy ... " The acquisition will generate a 18% increase in Citizen’s daily production and includes an additional ~13,000 BOEPD (56% liquids), 200 operated wells, and 739 non-op wells. Citizen’s existing ~245,000 net acre position coupled with Sellers ~80,000 net acres will create a dominant Mid-Continent footprint."
So 13000 BOEPD from 200 operated wells and 739 non operated wells on 80,000 net acres in the locations below
The vast majority of the acreage is not in the SWISH AOI , save the 2 red contiguous units in Stephens County so the quality of the whole package will be variable and not comparable to the BRK position as a whole.
Secondly, the 13000 (56 % liquids) BOEPD comes from almost 1000 wells, or an average 13 BOEPD from each well. If you assume the vast majority of the production comes from operated wells and assign the 13000 BOEPD to those 200 wells, you get 65 BOEPD per well. So we have a variable quality of acreage producing what can be termed as legacy well production.
What is not disclosed ( I haven't done a deep dive into the acquisition) is the price paid, PDP or PUD reserves and how many PUD locations are available to drill on the 80,000 net acres, what the PUD reserves per well are and economics surrounding those wells. Without knowing the circumstances, it looks like on PE company selling to another PE company at the end of it's term .
In regards to the BRK acreage, excluding the 960 acres in the new Bruins DSU, BRK are producing ~2500 BOEPD gross, ~1400 BOEPD net from just 3 wells on a gross 2800 acres ( 2300 net) with ~20 development locations. If someone like Citizen came in , purchased the whole SWISH position from BRK then with 2 rigs batch drilled, completed the 20 wells in 18-24 months, the DSU's would be producing over 20,000 BEOPD ~70 +% liquids gross or ~11,000-12,000 BOEPD net ( assuming average IP24 of 1400 BOEPD) very quickly and probably be able to maintain that production for ~2 years as the early wells decline and the later wells take 3-4 months to hit peak flow. The front loading of the production cashflow would make that a compelling development proposition to any major looking for high margin, high flow rate production.
It would cost them ~US$ 10 or less ( assuming 10-20% cost savings for batch drilling) per well but the payout period should be less than 12 months as shown by BRK.
The whole BRK acreage is concentrated, tier 1 acreage in the oil, high pressurised and liquids rich basin margin fairway which represents the Mayfair and Park Lane properties in the Monopoly board. Looking at the spread of acreage in the above transaction, there is a fair bit of the whole board represented.
The value for any prospective purchaser is not so much in the producing reserves, as there is no upside to those. Both the purchaser and seller will have their PDP NPV values fairly close, as the reserve number will be mutual and the discount factor applied for those reserves shouldn't be much more than 5-10%. It is the PUD valuation where the value is generated by both parties as the purchaser should be able to extract more reserves at a faster rate than BRK and the discount to NPV will be greater (20-30%) . The purchaser should have a greater reserve number and may apply a larger discount in it's valuation than BRK ascribe to their reserve number and discount, but both valuations may be close enough for both parties to give and take to come to an agreement. For the purchaser, they make an immediate bookable profit on the purchase of the PUD's, because they pay the discounted NPV price, but book the reserves at ~NPV on their balance sheet. Effectively, they get a very low risk, high value reserve addition immediately . That is why buying high quality PUD's is so attractive for the purchaser. In addition, because the new wells drilled produce a high initial rates with a flush production plateau, so they benefit from new well production which boosts their near term production.
For the seller, even with a larger discount applied than for PDP reserves, the fact they don't need to spend tens/ hundreds of millions of dollars drilling wells, and spend a few years in that drilling process, they can get 10-20+ times their invested capital back very quickly .... a real win/win situation for both parties.
As I mentioned before, I don't post about the share price or my valuation of the company. I have an internal valuation of my best estimate of BRK reserves and NPV of the current reserve base ( which effectively needs an upward revision to include the estimated reserve gain due to the addition of the Bruin's DSU minus the spend of a HBP well) , but I am keeping that to myself as it is meaningless and is constantly changing . Suffice to say that number is a multiple of the current market cap.
Will BRK get less than what the want for the acreage?... possibly yes. Will the buyer pay more than they wanted? ....probably yes as well. Will both parties walk away with a smile on their collective faces, almost certainly yes.
With the focus on monetisation in the latest presentation, I would be surprised if we don't get a to see the value of the BRK acreage unveiled within the next 6 months or so.
I appreciate I didn't answer you question as such for which I apologise but hopefully there is enough detail to show the Citizen acquisition is not comparable to what BRK have to offer.
Cheers
Dan
BRK Price at posting:
1.2¢ Sentiment: Buy Disclosure: Held
(20min delay)