Roan Resources, Inc. (ROAN - Free Report) has reached an agreement with Citizen Energy Operating, LLC, a subsidiary of private equity major Warburg Pincus LLC. By dint of this deal, the former will be acquired by the latter. The transaction value reveals an all-cash deal worth $1 billion comprising $780-million net debt as of Sep 30.
This strategic move would provide Roan shareholders with $1.52 in cash for each share of Roan common stock they own, accounting for a 24% premium to the closing price prior to the acquisition announcement. This, in turn, implies a total equity consideration of $234.2 million. The buyout pact is expected to unlock a significant value for the company’s shareholders wherein they are anticipated to receive a substantial premium.
Recently, Roan was witnessing weak drilling activities in its core operating SCOOP and STACK basins in Oklahoma. This downside resulted from the irregularity in the region’s geology, making it an expensive area for producers and therefore inducing a higher cost structure.
In addition to its buyout declaration, the Tulsa-based company has appointed its new CEO Rick Gideon who will assume office immediately. In order to help the new CEO understand and evaluate the company’s overall agenda, Roan has planned to trim its drilling and development operations for the time being by further postponing all its completion activities. Thus, the company has informed investors not to depend on its guidance that was issued in the last reported quarter’s earnings.
Debt financing for the deal will be backed by a group of banks while equity financing will be supported by investment funds associated with Warburg Pincus and Citizen Energy.
The transaction is expected to close by the first quarter of 2020 and is contingent on pending approvals and customary conditions.
Roan Resources Inc., headquartered in Oklahoma City, is an oil and natural gas company. It is focused on the development, exploration and acquisition of unconventional oil and natural gas reserves in the Merge, SCOOP and STACK plays of the Anadarko Basin in Oklahoma.
Zacks Rank & Key Picks
Roan carries a Zacks Rank #3 (Hold). Better-ranked players in the energy space include BP Midstream Partners (BPMP - Free Report) , Dril-Quip, Inc. (DRQ - Free Report) and TC Pipelines, LP (TCP - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
BP Midstream’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters.
Dril-Quip earnings beat the Zacks Consensus Estimate in three of the previous four quarters.
TC Pipelines earnings beat the Zacks Consensus Estimate in three of the last four quarters.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>