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How Will Penn Virginia Gain From $86M Deal With Hunt Oil?

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Penn Virginia Corporation has decided to boost its acreages in the oil and gas rich Eagle Ford Shale play.

About the Deal

For the acquisition, the upstream energy player is expected to give roughly $86 million in cash to Hunt Oil Company. The transaction – expected to conclude on or before March 1, 2018 – will likely be financed with debt capital under the credit facility of Penn Virginia.

Benefits

The upstream energy player’s core leasehold resources in Eagle Ford will likely get boosted by roughly 9,700 net acres. Hence, with the closure of the deal, Penn Virginia will be able to operate more than 99% of its resources in the Eagle Ford play. On top of that, net drilling inventory of Penn Virginia is also anticipated to increase 17%.

The acquisition will also boost the company’s production by 1,870 barrels of oil equivalent per day (BoE/D). Investors should note that 89% of the increased production will likely be oil.

Higher production, especially in the face of partial crude recovery, is highly beneficial for the company. Oil is now trading above the $60 per barrel mark, way higher than multi-year low marks reached during 2016.

About the Company

Headquartered in Houston, TX, Penn Virginia is primarily involved in the exploration and production of crude resources in domestic plays. The company has no current debt and the long-term debt of $245 million is way lower than $1.1 billion during 2014 — reflecting sound financial positions.

However, the pricing chart scenario is not impressive. Over the past year, the stock fell 14.8%, underperforming the industry’s13.2% decline.

Zacks Rank & Stock Picks

As a result, Penn Virginia carries a Zacks Rank #3 (Hold).

Meanwhile, better-ranked stocks in the energy sector are Lonestar Resources US Inc. , Northern Oil and Gas Inc. (NOG - Free Report) and Cabot Oil & Gas Corporation . Lonestar and Northern sport a Zacks Rank #1 (Strong Buy), while Cabot carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.  

Headquartered in Fort Worth, TX, Lonestar is an upstream energy player. The company is expected to post year-over-year earnings growth of 81.3% in 2017.

Based in Minnetonka, MN, Northern Oil is an upstream energy player. The company’s 2017 revenues are estimated to grow almost 48%.

Headquartered in Houston, TX, Cabot is involved in exploration of oil and gas. The stock will likely report earnings growth of 350.8% in 2017.

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