Oppenheimer uses the following valuation: Valuing the net production increase of 11.4 mboed at $75K per flowing barrel, the deal values the Bakken position at just over $3,800/acre, well below the roughly $20K/acre, adjusted for production, QEP Resources Inc (NYSE:QEP) paid last month.
Oil Focus. The acquisition in the Bakken demonstrates the continued shift of the majors to oil and liquids-rich plays amid the current weakness in natural gas prices. Among integrateds, Exxon Mobil Corporation remains the most levered to North American natural gas, which should account for an estimated 16% of 2012 production, double the next highest major. The deal with Denbury Resources Inc. (NYSE:DNR) increases the size of Exxon Mobil Corporation’s Bakken position by approximately 50%, to over 600K acres, still not big enough for Big Oil.
? Hartzog Draw/Webster Fields. The fields Denbury Resources Inc.(NYSE:DNR). will receive from Exxon Mobil Corporation (NYSE:XOM) are ideal candidates to CO2 flooding and are close to Denbury Resources Inc.(NYSE:DNR)’s existing or planned CO2 pipelines. Exxon Mobil Corporation (NYSE:XOM) has also agreed to either sell to DNR a third of its LaBarge CO2 field or expand volumes it will sell under an existing sales contract, which will allow for the delivery of up to 115 mmcf/d of CO2. DNR will use the proceeds to acquire additional fields in the Gulf Coast or Rocky Mountains suited for CO2 flooding, reduce debt, and resume its prior share repurchase program.
In other Exxon Mobil Corporation (NYSE:XOM) news, Oil Search, Exxon Mobil Corporation’s partner in the PNG LNG project, disclosed today that the Trapia-1 well was a dry hole. Exploration drilling is ongoing to support expansion for a third train at the project, of which Exxon Mobil Corporation (NYSE:XOM) is the operator with a 33% interest. The disappointment with Trapia-1 follows a large gas discovery at the P’nyang prospect. The next prospect to watch will be the Hides prospect. LNG production from the project’s initial phase is expected to start in 2014.
Shares of Exxon Mobil Corporation (NYSE:XOM) are trading at $91.15, up 0.65%, while Denbury Resources Inc.(NYSE:DNR) is trading at $17.51, up 4.72%.
Disclosure: No position in any securities mentioned