Current share price: 5.9c Acquisition to be settled on 24 April...

Current share price: 5.9c
Acquisition to be settled on 24 April 2018.
Market cap: $405m at 5.9c/share (including pending CR to be settled 23 April 2018)
Cash: US$77m (post-acquisition)
Debt: US$250m (post-acquisition)

1. RESERVE:

2P Reserves, pro forma for the acquisition: 170.7 mmboe
NPV at 10% of US$936.6m or A$1.2 billion, based on WTI oil price US$59/bl in 2018 then gradually reducing to US$51.67/bl 2023 & thereafter.

Currently oil price is at USD$68/bl, this will lift valuation substantially.
Accordign to the last annual report, SEA is to produce 21,000-22,000 Boe/d in 2019 which, at a $56 per barrel West Texas Intermediate oil price, generates approximately US$250 million in EBITDA. A reasonably modest US$5 change in the price of crude will move Morgans’ valuation by a very significant circa 6 cents per share.




Director Quote from the Annual Report issued 29 March 2018:

"This is causing large public companies with lower cost of capital to exit the Eagle Ford with their assets being bought by smaller public and private companies with higher cost of capital. This is resulting in attractive full cycle economics for those deploying capital into the acquisition and development of assets in the Eagle Ford.

Our recently announced acquisition positions us to capitalize on these trends to grow shareholder value. It improves the quality of our remaining inventory which boosts our capital efficiency. It gives us the scale, both in balance sheet and drilling inventory, to reduce capital costs. And, finally, it positions us to produce 21,000-22,000 Boe/d in 2019 which, at a $56 per barrel West Texas Intermediate oil price, generates approximately US$250 million in EBITDA. This acquisition and resulting strategic position transforms Sundance’s ability to create shareholder value."


2. BROKER VALUATION:

Morgans has a price target of 20c.

Forget Santos Ltd! Morgans is tipping a 250%+ gain for this oil and gas stock

Brendon Lau | April 3, 2018 | More on: BHPBPTSEASTO
It’s hard not to be tempted to jump onto Santos Ltd(ASX: STO) following a takeover bid for the energy stock but Morgans thinks there is another stock in the sector that will offer a much bigger pay-off.
This is despite Santos trading at a greater than 10% discount to the indicative offer price of $6.50 a share even after the stock rallied 16.2% to $5.89 on Tuesday.

But that’s nothing compared to Morgans’ forecast 255% increase in Sundance Energy Australia Ltd’s(ASX: SEA) share price!

The broker initiated coverage on the junior energy company with an “add” recommendation and 21 cents a share price target as it undertakes a game changing acquisition.
This compares to Sundance’s last traded price of 5.7 cents as the company closes off its retail entitlement offer as part of its $331.2 million capital raise.

That’s a supersize raising given its market cap of just over $70 million and Morgans’ price target accounts for the dilutionary impact from the mega capital raise.
But transformative acquisitions don’t come cheap and its purchase of 21,900 acres of land at Eagle Ford in the US could make it one of the largest oil producers on the ASX.

Interestingly, BHP Billiton Limited(ASX: BHP) is trying to get rid of its shale assets at Eagle Ford. I guess man’s methane is another man’s poison.

According to Morgans, Sundance will increase its net acres to 56,600, grow production from its current ~9,000 barrels of oil equivalent per day (boepd) to 21,500-22,500 boepd in 2019, and expand its proven reserves (called 1P) to 113 million barrels of oil equivalent (mmboe).

This gives Sundance a pro-forma enterprise value (EV) of around $600 million and that compares very favourably to its peer Beach Energy Ltd’s (ASX: BPT) EV of $3.14 billion even though Beach has similar 1P reserves and debt levels to Sundance.

What’s more, the capital raise should be sufficient to fund Sundance till it becomes free cash flow positive. This means the energy company is unlikely to need to raise more cash in the future to fund working capital requirements.

That’s a great position for any junior oil and gas company to be in. Let’s just hope the oil price stays at the top end of its trading range as a reasonably modest US$5 change in the price of crude will move Morgans’ valuation by a very significant circa 6 cents per share!

https://www.********.au/2018/04/03/...ipping-a-250-gain-for-this-oil-and-gas-stock/

3. FUNDS & DIRECTOR BUYS:

Two funds have increasing their holdings by participating 5.9c CR, TGA was also buying on market.
Four directors increasing holdings by participating 5.9c and/or buying on market recently.


Massive new issues do put pressure especially selling from one underwritter, Euroz; another underwritter, Morgans, was still a net buyer. As oil price is on the uptrend, I expect SEA to be re-rated shortafter the acquisition.


All imo & always do your own research.