Texon Petroleum welcomes investor approaches to fund Texas shale oil drilling - source Proprietary Intelligence Main body : Texon Petroleum, an ASX-listed shale oil and gas company with operations on the US Gulf Coast, would be receptive to approaches from financial and strategic investors to help it fund its drilling program, a company source said.
Texon will be giving some thought on how to proceed, as its drilling program is quite expensive, the company source said. It could become a takeover target given the majors’ interest in shale oil and the fact that Texon is already in production, two sector analysts said.
The company recently bought a further 480 acres of leases in the Eagle Ford region, an area rich in shale oil and gas deposits in southern Texas. With the recent acquisition, Texon owns about 7,200 acres. Other major players operating in the Eagle Ford region include BHP Billiton, which recently acquired Petrohawk for USD 15bn, as well as Chesapeake Energy, Talisman Energy, Pioneer Natural Resources and Swift Energy, the company source said.
Texon’s acreage has the potential for about 90 potential wells in the Eagle Ford area alone, the first analyst said. As each well costs USD 8m-9m, and Texon has less than USD 3m of monthly operating cash flow, the company would likely become a target for part or all of its assets, the analyst said.
The company brought on former Petrohawk executive Clifford Foss Jr. as its new president and chief executive late last year. The hire signals Texon is strengthening its corporate focus with a potential aim to sell a stake or some assets, the analyst added.
The company’s market cap is AUD 147m, but it could fetch about AUD 170m in a takeover based on the valuations of comparable companies operating in the region, according to the first analyst. It may be attractive to Devon Energy and Chesapeake, he said.
Texon has 18 producing wells, including four in the Eagle Ford region and five in the Wilcox region. The Eagle Ford wells produce 90% oil and gas liquids, and about 10% gas. That should bode well for the company’s attractiveness, as oil prices have remained relatively stable while gas prices have tumbled dramatically in recent months from a high of USD 10-13 per million cubic feet to about USD 3 per million cubic feet, the second analyst noted.
For the quarter ended 30 September, Texon’s gross average daily production was 3.91 billion cubic feet of gas per day and 726 barrels of oil per day.
by Rimin Dutt
TXN Price at posting:
60.5¢ Sentiment: Hold Disclosure: Held
