Oil and gas explorer
Jones Energy Inc.
) has agreed to acquire certain producing and undeveloped
properties in the Anadarko Basin from an undisclosed private
seller for $195 million. The market reacted positively to the
news, which was announced after market hours on Monday, Nov 25.
Shares of the exploration and production company opened at $14.31
on Nov 26 - up 3% from the previous close. The stock price rose
further, settling at $14.66, when the market closed yesterday.
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The to-be-bought assets - spread over 26,000 net acres and 92
producing wells in the Cleveland, Tonkawa, and Marmaton plays in
the Texas Panhandle and western Oklahoma - hold an estimated 14.3
million oil-equivalent barrels (MMBOE) in proved reserves and
will add 3,400 BOE (54% liquid) to the onshore outfit's daily
production. The Anadarko Basin properties would also add 225
drilling locations to Jones Energy's inventory.
The potential acquisition - which is likely to be sealed by
year-end subject to customary closing conditions - is expected to
be immediately accretive to Austin, TX-based Jones Energy's
earnings. Importantly, the addition of the acreage will boost
growth prospects of the company in the Anadarko Basin's
liquids-rich Cleveland region, one of the country's largest
onshore oil plays. While Jones Energy already possesses
significant development opportunities in the region, the
transaction will increase the company's total identified drilling
locations in Cleveland to more than 680.
New York-listed Jones Energy, which plans to finance the deal
through its existing revolving credit facility, is engaged in the
acquisition, exploration, and development of oil and gas
properties. The company's operations are concentrated primarily
in the Anadarko and Arkoma basins of Texas and Oklahoma.
With rapidly rising output, a business model focused on
operational efficiencies and attractive acquisitions/growth
projects, Jones Energy provides investors with an attractive
option in the energy space. However, the company's exposure to
the inherently cyclical and volatile exploration and production
sector offsets these strengths and remains a key area of concern.
As a result, Jones Energy currently retains a Zacks Rank #3
(Hold), implying that it is expected to perform in line with the
broader U.S. equity market over the next one to three months.
However, some better-ranked domestic upstream energy stocks
SM Energy Co.
Matador Resources Co.
Abraxas Petroleum Corp.
). All these entities - sporting a Zacks Rank #1 (Strong Buy) -
have solid secular growth stories with potential to rise
significantly from current levels.