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Earthstone (ESTE) to Buy Midland Basin Assets for $126.5M

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Earthstone Energy (ESTE - Free Report) reached an agreement with Tracker Resource Development to purchase operated oil and gas-producing assets in the Midland Basin.

The company also agreed to acquire related well-bore interests from Sequel Energy Group LLC. Notably, Earthstone identified an inventory of 49 horizontal locations in the Wolfcamp play of the Midland Basin.

The transaction is expected to be valued at $126.5 million, including $81.6 million in cash and 6.2 million shares of Class A common stock of Earthstone. Notably, Tracker is 49% owned by each of 1901 Partners Management LP and EnCap Investments, L.P.

The to-be-acquired assets spread across more than 20,300 net acres in Irion County, TX, with no drilling commitments required on the acreage. The wells currently have a net production capacity of 7,800 barrels of oil equivalent per day (boe/d), of which 21% is crude oil. Notably, the company expects the acquisition to result in an increase in production by 5,800-6,000 boe/d in the second half of 2021.

The move of acquiring the complementary Midland Basin assets strengthens Earthstone’s consolidation strategy after the closure of the $185.9-million acquisition of Warburg Pincus-backed Independence Resources Management LLC. Moreover, the acquisition is expected to boost the company’s greater Permian Basin production capacity. The deal is expected to close in third-quarter 2021.

Company Profile & Price Performance

Headquartered in Denver, CO, Earthstone is an independent oil and gas exploration and production company.

Shares of the company have outperformed the industry in the past six months. The stock has gained 185.1% compared with the industry’s 110% growth.

 

 

Zacks Rank & Stocks to Consider

Earthstone currently carries a Zack Rank #3 (Hold).

Some better-ranked players in the energy space are Ecopetrol S.A. (EC - Free Report) , PetroChina Company Limited (PTR - Free Report) , and Suncor Energy Inc. (SU - Free Report) , each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ecopetrol’s earnings for 2021 are expected to rise 27% year over year.

PetroChina’s earnings for 2021 are expected to grow 45.5% year over year.

Suncor’s earnings for 2021 are expected to surge 230% year over year.

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