The New Mexico tourist tag line neatly sums up the attractions of the Basin part of the New Mexico Delaware. Credit Suisse has seen some very strong industry results in the Bone Spring and Wolfcamp X-Y. Not only have 180 days cums been among the best in the industry but the trend continues to improve. Selling the oil sands and building locations in the Permian make sense. Credit Suisse's TP is unchanged as the lower value for OSM offsets the inventory accretion. However there is now more blue sky inventory upside.
This acquisition increases the running room beyond 2021. There are sometimes growing pains entering new basins and building out logistics, this position likely should have more bolt ons to convince investors on critical mass but Marathon Oil Corporation (NYSE:MRO) now moves into the middle of the pack of large cap shale inventory, no mean feat since the CEO took over. A share of Marathon now incorporates 365k net surface acres in Oklahoma, 145k net acres in the Eagle Ford, 270k net acres in the Bakken and 51k acres in the Delaware.
Credit Suisse has updated its model, adjusting for the sale of the Canadian business for $2.5b, and the Permian acquisition for $1.1b. Lower volumes across 2017-19 mean that EPS is slightly lower. Credit Suisse's 2017/18 EPS is now ($0.08)/$0.43 from ($0.03)/$0.51, respectively. Key risks to the firm's earnings estimate and NAV would be low oil prices. At $50 WTI, Marathon would be worth $10/sh.
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