[Editor's note: This story was updated at 4:05 p.m. CT Dec. 7]
Gulfport Energy Corp. (NASDAQ: GPOR) said Dec. 7 it snagged a bolt-on to its dry gas Utica acreage position at a price that analysts estimate is roughly three times less expensive than the company’s current leasehold.
For roughly $87 million, Gulfport is acquiring 12,600 net undeveloped dry gas Utica acres from an undisclosed third party. The acreage is 50% HBP and located in northern Monroe County, Ohio, near or adjacent to Gulfport’s development plan.
At an estimated $6,900 per acre price, Capital One Securities said the acquisition isn’t a big needle mover for Gulfport’s already stout dry gas inventory. However, “the price is right.”
The acreage price compares “favorably” to the $19,000 per acre value Capital One modeled for the 141,000 net dry gas Utica acres already held by Gulfport, the firm said in a Dec. 7 report.
“The new acreage implies 105 net wells at 1,000-ft spacing but in reality will more likely block up contiguous acreage and extend laterals to add value in the near term rather than just be relegated to the end of a 10-year queue of inventory,” Capital One said.
Based on improving natural gas fundamentals, Gulfport said in November it planned to increase its development pace during 2017.
The company intended to run at least six rigs next year. Production is estimated to grow by up to 25% with drilling and completion capex of up to $725 million.
Gulfport’s new acreage doesn’t have third-party midstream commitments, said Kyle Rhodes, RBC Capital Markets analyst. The new acreage will be dedicated to the company’s joint venture with Rice Energy Inc. (NYSE: RICE), Rhodes added.
Gulfport said it expects the transaction to close in December. The company plans to fund the acquisition with available cash-on-hand.
Gabriele Sorbara, senior equity analyst at The Williams Capital Group, estimates Gulfport to have about $277.3 million cash-on-hand pro forma for the transaction. The company’s total debt is also about $1.17 billion including $207 million of letters of credit, he added in a Dec. 7 report.
Overall, Sorbara expects Gulfport to have about $770.3 million of total financial liquidity.
Emily Patsy can be reached at epatsy@hartenergy.com.
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