Jones Energy Rallies on Asset Buy Deal - Analyst Blog
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.
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 include SM Energy Co. ( SM ), Matador Resources Co. ( MTDR ) and Abraxas Petroleum Corp. ( AXAS ). All these entities - sporting a Zacks Rank #1 (Strong Buy) - have solid secular growth stories with potential to rise significantly from current levels.
ABRAXAS PETE/NV (AXAS): Free Stock Analysis Report
JONES ENERGY-A (JONE): Free Stock Analysis Report
MATADOR RESOURC (MTDR): Free Stock Analysis Report
SM ENERGY CO (SM): Free Stock Analysis Report
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