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'Hungry like the Wolfbone'

posted Dec 8, 2011, 10:31 PM by Jeff Davies
Few days ago, but Comstock acquisition multiples:

$333 million deal for 68k gross, 44k net acres in Reeves County, TX
Prospective for Wolfbone (Bone Springs / Wolcamp), ~86% operated
23,200 MBOE proved reserves (75% oil, 90% PUDs), $14.35/BOE
178 MMBOE resource potential, 935 vertical wells @ 40 acre spacing
1400 BOE/d for an absurd $238k/flowing bbl
46 net wells in '12
$4-$4.5MM/well, so about $170-200MM campaign
180-250 MBOE EURs
150-300 BOE IPs
8-12 fracs
60 day cycle times

Land and drilling costs total about $35/BOE.  Pricing is WTI less 1-2.  The gas is high BTU, so double NYMEX for the entire stream (Concho realized $8.31 last qtr for its gas).  Commented LOE wouldn't change more than a few pennies, implying around $6-7/BOE operating costs.

Comstock produced 285MMcfe/d last qtr, 95.5% gas.  Leverage was 2.5x on $300MM EBITDAX.  CRK is yet another gassy e&p dealing with the harsh realities of the nat gas curve ($4.18 '12-'14 strip).  They have a very low cost structure, but even the low-cost gassers have to be resigned to low prices for longer.  They are funding the deal under the revolver, with plans to sell some non-core assets and SGY stock to raise cash for debt repayment.  Borrowing base goes to $700mm with the deal but they had $150mm outstanding on RC at 9/30 so a bond deal to clean the revolver up seems likely.  It looks like reserve  leverage is still only about a buck pf for the deal, but the PD% will drop below 50%.  Looks like existing CRK bonds in high 8s.