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Athlon Energy Prices Share Issue - Analyst Blog

Posted: 4/17/2014 7:24:00 PM
Referenced Stocks: ATHL;MILL;WLL;RRC

Fort Worth, TX-based Athlon Energy Inc. ( ATHL ) has priced an underwritten public offering of 12,875,000 common shares - upsized from the original offering size of 11,000,000 shares - at $40.00 a piece, with a 30-day over-allotment option for an additional 1,931,250 shares. The offering, which was announced on Apr 15, is likely to close on Apr 23.

The oil and liquids-rich natural gas explorer plans to use the net proceeds from this offering, together with the amount generated from a senior notes offering, to pay for the pending acquisitions, as well as for corporate purposes.

Athlon Energy, which went public in Aug last year, is an independent exploration and production company engaged in the acquisition, finding, and development of unconventional onshore oil and gas properties. The company's operations are concentrated primarily in the Permian Basin in West Texas.

With holdings of around 100,000 net acres in the eastern portion of the Permian Basin and approximately 30 years of vertical drilling inventory, Athlon Energy's asset portfolio is primed for high production growth and peer-leading returns.

Earlier this month, Athlon Energy agreed to acquire certain producing and undeveloped properties spread over 23,500 net acres in northern Midland basin from five different sellers for a combined $873 million in cash.

The to-be-bought assets in the Texas counties Martin, Upton, Andrews and Glasscock - adjacent to Athlon Energy's existing fields in the region - holds an estimated 250 million oil-equivalent barrels (MMBOE) in reserve potential and will add 4,800 BOE (67% oil) to the outfit's daily production. The properties would also add 425 'highly prospective' horizontal drilling locations to Athlon Energy's inventory.

However, as is the case with other independent exploration and production companies, Athlon Energy's results are directly exposed to oil and gas prices, which are inherently volatile and subject to complex market forces. Realized prices could differ significantly from our estimates, thereby affecting the company's revenues, earnings and cash flow.

As a result, Athlon Energy currently retains a Zacks Rank #3 (Hold), implying that it is expected 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 include Range Resources Corp. ( RRC ), Miller Energy Resources Inc. ( MILL ) and Whiting Petroleum Corp. ( WLL ). While Range Resources and Miller Energy Resources hold a Zacks Rank #1 (Strong Buy), Whiting Petroleum carries a Zacks Rank #2 (Buy).

ATHLON ENERGY (ATHL): Free Stock Analysis Report

MILLER ENERGY (MILL): Free Stock Analysis Report

RANGE RESOURCES (RRC): Free Stock Analysis Report

WHITING PETROLM (WLL): Free Stock Analysis Report

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