Energy Sector Dealmaking On Pause- As Buyers Eye Bottom

Oil in Storage Rises More Than Expected Again

“You’re not going to lose anything by waiting,”

(Bloomberg) — When Whiting Petroleum Corp. put itself up for sale this month, the oil industry appeared on the brink of a deal surge that would dramatically redraw the energy landscape.

Instead, Whiting decided it was better off selling shares and borrowing more money to surmount a cash shortfall brought on by tumbling crude prices. The lesson? Takeover fever driven by the oil-market crash is yet to really heat up because share prices haven’t fallen as fast or hard as crude.
It may be later this year or early 2016 before buyout candidates resign themselves to a long-term market slump and lower valuations, said David Zusman, chief investment officer at Talara Capital Management LLC.
“Nobody wants to catch a falling knife,” said Chris Pultz, portfolio manager of a merger-arbitrage fund at Kellner Capital in New York. “The last thing anyone wants to do is price a deal now, only to have oil fall to $30 a barrel later on. There’s a lot of skittishness.”
Whiting, a potentially juicy prize as the biggest oil producer in North Dakota’s Bakken shale, isn’t the only one fending off bargain seekers. Tullow Oil Plc, an Africa-focused group seen as a perennial takeover target, earlier this month tapped lenders to restore its finances. In North America, Encana Corp., Noble Energy Inc., RSP Permian Inc. and Carrizo Oil & Gas Inc. have sold new shares, effectively blocking deals.
Lesser Evils
For oil producers squeezed by heavy debt and a collapse in crude prices below $50, issuing new shares and rolling over old loans, when given the choice, remain lesser evils than a corporate fire sale. So far this year, the oil and natural gas sector has seen deals worth nearly $1.9 billion, the lowest quarterly figure in at least five years, according to Bloomberg data. In the first quarter of 2014, energy deal making reached $27.9 billion.
“Every time there’s a market downturn, you always have this chorus of suggested interest in takeovers,” said Vincent Piazza, global energy research coordinator at Bloomberg Intelligence in New York. “In reality, few deals of any consequence occur.”
A disconnect between company valuations and the crude market is adding to buyers’ uncertainty. Since Dec. 15, stock values in an index of 20 U.S. producers have bounced back an average 7 percent, even as oil fell another 15 percent to $47.51 a barrel on Tuesday.
Second Half
The price crash was so swift that many companies may be waiting for the market to stabilize before agreeing to major acquisitions, said Osmar Abib, who leads the global energy practice for Credit Suisse Group AG.
“You’re going to see a much bigger flow of announcements in the second half of the year because by then, people will have adjusted to the new environment,” Abib said Tuesday in an interview.
Buyers and sellers need time to find common ground on valuations, Scott Sheffield, chief executive officer at Pioneer Natural Resources Co., said Tuesday in an interview at the Howard Weil Energy Conference in New Orleans.
“It’s going to take at least mid-summer or late in the year for oil prices to bottom and to start going up again and for people to develop their own views,” Sheffield said.
Much will depend on where oil prices settle. Sheffield said he sees a rebound to $60 a barrel by the end of the year, with prices ranging from $60 to $80 over the next five years. A $60 price over the long term will lead to more consolidation, he said.
Rising Rates
Another possible deal-driver: the availability of capital from loans and equity offerings may dry up, particularly if the U.S. Federal Reserve increases interest rates.
Dealmaking hasn’t completely ground to a halt. Whiting, based in Denver, paid $1.8 billion in stock and assumed $2.2 billion in debt in December to close on the purchase of Bakken rival Kodiak Oil & Gas Corp., a deal announced in July, when crude was still above $100 a barrel.
That same month, Spain’s Repsol SA agreed to pay $8.3 billion in cash and assume $4.66 billion in debt for Canada’s Talisman Energy Inc. The transaction has yet to close.
Companies that own drilling rigs and provide equipment and field services to the producers are most prone to consolidation during bear markets, Piazza said. During the last crude slump in 2009-10, 247 oilfield-services deals with a combined value of $32 billion dwarfed the 51 transactions among oil producers, which amounted to just $6.6 billion, he said.
Blackstone, Carlyle
Money is certainly waiting in the wings for a flurry of acquisitions. The world’s four largest buyout firms, including Blackstone Group LP and Carlyle Group LP, have amassed a $30 billion war chest for deals.
“This is one of the best periods, if not the best, to invest in global energy,” said Marcel van Poecke, head of Carlyle International Energy Partners.
Piazza of Bloomberg Intelligence said the biggest oil companies are more likely to snatch up individual assets and business units of smaller rivals, rather than acquire entire corporations. Exxon Mobil Corp. is among buyers indicating they’re particularly interested in acquiring drilling assets that expand on their existing oilfields.
For those companies with an appetite for wholesale corporate takeovers, the best approach may be to bide their time, said Jack A. Bass tax strategist .
“You’re not going to lose anything by waiting,” Jack A. Bass advises clients. “You’ll probably get it cheaper a few months from now.”

Protect your portfolio profits read more  at http://www.youroffshoremoney.com

Oil: Value trap or buying opportunity?

 

Oil Well cartoons, Oil Well cartoon, funny, Oil Well picture, Oil Well pictures, Oil Well image, Oil Well images, Oil Well illustration, Oil Well illustrations

 

Oil: Value trap or buying opportunity?

Depends if you are investing or a speculating/trading. The previous week’s oil inventory numbers show U.S. crude oil inventories are at the highest level for this time of year in at least the past 80 years. (Source: U.S. Energy Information Administration 11Feb15 for week ending 6Feb15) Investors reacted Tuesday to Citigroup indicating that $20 oil/barrel may soon be on the way. They must have an awful lot of short positions they need going back the right way: “Oil Could Plunge to $20 & this Might be the end of OPEC”: Citigroup goes on to say, “The recent surge in oil prices is just a “headfake,” and oil as cheap as $20 a barrel may soon be on the way, as it lowered its forecast for crude. Despite global declines in spending that have driven up oil prices in recent weeks, oil production in the U.S. is still rising, wrote Edward Morse, Citigroup’s global head of commodity research. Brazil and Russia are pumping oil at record levels, and Saudi Arabia, Iraq and Iran have been fighting to maintain their market share by cutting prices to Asia. The market is oversupplied, and storage tanks are topping out. A pullback in production isn’t likely until the third quarter, Morse said. In the meantime, West Texas Intermediate Crude, which currently trades at around $52 a barrel, could fall to the $20 range “for a while,” according to the report. The U.S. shale-oil revolution has broken OPEC’s ability to manipulate prices and maximize profits for oil-producing countries.

“It looks exceedingly unlikely for OPEC to return to its old way of doing business,” Morse wrote. “While many analysts have said in past market crises ‘the end of OPEC,’ this time around might well be different,” Morse said. Citi reduced its annual forecast for Brent crude for the second time in 2015. Prices in the $45- $55 range are unsustainable and will trigger “disinvestment from oil” and a fourth-quarter rebound to $75 a barrel, according to the report. Prices this year will likely average $54 a barrel.” (Bloomberg 9Feb2015)

Thursday, Swanzy Quarshie of Sentry Investments was on BNN and gave some of our historical favorites some exposure. Her macro-view of the sector/market is a positive outlook for energy and energy related equities for 2015, however, Sentry remains cautious in the short term. Although much of the issues inherent in the oil markets have been priced into the commodity, they see the possibility of a retest of the oil price lows of January driven by growing crude inventory levels globally (levels are at an 80 year high!). For now, they are firmly in the camp that the current demand/supply imbalance is driven by excess supply and expect the market to move closer to equilibrium towards the end of the year with a slowdown in North American drilling activity. At this time, they do not expect demand to have a negative impact on the imbalance. In this environment, they favour companies with strong balance sheets and good cost structures who can take advantage of this downturn to further strengthen their businesses. They prefer oil weighted producers in the short to midterm given the structural challenges in the North American gas market. In the longer term, they are optimistic that growing export channels and increasing industrial demand for natural gas will help to strengthen the North American gas market. Her Top picks: Bankers Petroleum (BNK-tsx), Raging River Exploration (RRX-t) and Whitecap Resources (WCP-t). Legendary value investor Seth Klarman has built a position in Bellatrix (BXE-tsx): According to reports, legendary value investor Seth Klarman has built a position in Bellatrix. Klarman has purchased 21,839,400 common shares of BXE, representing 11.4% of the company’s shares outstanding. Separately, Orange Capital, LLC at last report held 28,146,263 common shares of BXE, representing 14.7% of the company. This week, Canaccord Genuity Energy Analyst Anthony Petrucci initiated coverage on BXE and highlights the company is currently trading at 7.1x 2015E EV/DACF, which is a discount to its peer group at 10.3x. Likewise, its P/NAV of 0.6x is also discounted to the group average of -1.2

In Petrucci’s view, the discount for Bellatrix is too severe, particularly given the company’s asset base and growth profile. While a 2015E D/CF (trailing) of 4.8x is concerning, Petrucci notes BXE’s ability to spend JV dollars to bridge the gap during the current pricing environment. Forbes refers to Klarman as an “investing demigod.” Here is one of Klarman’s most notable quotes, “In capital markets, price is set by the most panicked seller at the end of a trading day. Value, which is determined by cash flows and assets, is not. In this environment, the chaos is so extreme, the panic selling so urgent, that there is almost no possibility that sellers are acting on superior information. Indeed, in situation after situation, it seems clear that fundamentals do not factor into their decision making at all.” (CG 11Feb2015) due to the length of the report, please call/email us if you would like it in its entirety.

 

Offshore Portfolio : http://www.youroffshoremoney.com

Goldman: Oil Will Keep Tumbling


(Bloomberg) — The slump in oil prices may not be over, according to Goldman Sachs Group Inc.
The decline in the number of U.S. drilling rigs that’s helped crude futures in New York rebound 14 percent from this year’s low isn’t enough to reduce an oversupply, the U.S. bank said in a note dated Feb. 10. Lower prices are needed for American output to slow sufficiently to rebalance global markets, it said.
Goldman joins Citigroup Inc. and Vitol Group, the world’s biggest independent oil trader, in signaling prices may resume a decline amid unrelenting production growth. West Texas Intermediate crude is still down by half from last year’s peak as the U.S. pumps the most in three decades. While companies have idled rigs and cut spending, it will be some time before production is affected, according to the International Energy Agency.
“The decline in the U.S. rig count likely remains well short of the level required to slow U.S. shale oil production to levels consistent with a balanced global market,” analysts including Damien Courvalin wrote in the report. “Lower oil prices will be required over the coming quarters to see the required U.S. production growth slowdown materialize.”
U.S. drillers cut rigs targeting oil by a record 435 to 1,140 in the nine weeks to Feb. 6, according to Baker Hughes Inc. That’s the lowest total since December 2011 as explorers slow efforts in the Permian Basin in Texas and North Dakota’s Bakken formation.
Production Growth
U.S. production will increase by 7.8 percent to 9.3 million barrels a day this year, the fastest pace since 1972, the Energy Information Administration said in its monthly report on Tuesday. That’s down 10,000 barrels a day from its January projection.
Goldman still forecasts “strong production growth” by the fourth quarter of 2015 amid increasing productivity at wells and rigs. The closing of the least-efficient output first also means more drilling has to stop to temper the increase in supplies, it said.
The bank cited producers as saying most of the decline has been for non-contracted rigs and they plan to renegotiate rates lower, meaning there’s potential for a rebound in activity. What’s more, the recent rally in prices has given them an opportunity to hedge against further losses, potentially reducing the need to slow output.
“A slower slowdown in U.S. shale oil production would leave risk to our price forecast skewed to the downside, as it increases the risk of running out of crude oil storage capacity, requiring a decline to shutdown economics,” the analysts wrote.
Forecast Lowered
Goldman last month cut its six- and 12-month forecasts for Brent to $43 and $70 a barrel respectively, from $85 and $90, amid increasing inventories. It also reduced its projections for U.S. benchmark West Texas Intermediate to $39 a barrel and $65, according to a Jan. 11 report.
Vitol Group’s Chief Executive Officer Ian Taylor said in London on Tuesday that “another move down” is possible before the market rebalances in the second half. Unrelenting U.S. crude production will lead to “dramatic” increases in inventories for several months, he said.
Prices may slump as low as $20 a barrel and remain there “for a while,” as U.S. supplies are joined by record output from Russia and Brazil, Ed Morse, Citigroup’s head of commodities research, said in a report e-mailed on Feb. 9.
WTI crude was at $49.86 a barrel on the New York Mercantile Exchange at 12:14 p.m. London time. The price dropped as low as $43.58 on Jan. 29, down from last year’s peak of $107.73. Brent futures, an international benchmark, fell 1.1 percent to $55.80 on the London-based ICE Futures Europe exchange.

My rant – the  curse of Cassandra :

Cassandra, daughter of the king and queen, in the temple of Apollo, exhausted from practising, is said to have fallen asleep – when Apollo wished to embrace her, she did not afford the opportunity of her body. On account of which thing :

when she prophesied true things, she was not believed.

I have written :

Managed Accounts Year End Review and Forecast

in part

 

Oil/ Energy

I am very happy for the call in natural gas prices – out at $12 and into oil. When oil was above $100 we lessened positions and that is our saving grace in the past two weeks. We are not bottom feeders and will wait for a turn in the market before reentering drillers or producers.

On Friday November 27th, crude oil prices dropped to below $72 and the slide has continued into the weekend, with Brent crude oil at $70.15 as I write this post. Shares of major oil companies traded down on Friday. Our former energy sector holdings are down another between 4% and 11%, including SDRL, which dropped another 8% following Wednesday’s 23% plunge..

Join in on the portfolio profits of Jack A. Bass Managed Accounts:

Fees : 1 % annual set up and a performance bonus of 20 % – only if we perform.

You can withdraw your funds monthly if you require an income stream.

Contact information:

To learn more about portfolio management ,asset protection, trusts ,offshore company formation and structure for your business interests (at no cost or obligation)

Email

jackabass@gmail.com OR

info@jackbassteam.com  OR

Call Jack direct at 604-858-3202

10:00 – 4:00 Monday to Friday Pacific Time ( same time zone as Los Angeles).

Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

 

Magnum Hunter Resources

MHR : NYSE : US$7.34
BUY 
Target: US$10.00

 

COMPANY DESCRIPTION:
Magnum Hunter Resources is an oil-leveraged
independent oil and gas company, engaged in low-risk
development and exploration in the Williston Basin and
Appalachian Basin (Marcellus and Utica Shales).

MARCELLUS AND UTICA LEADING THE CHARGE 

Investment recommendation
MHR has built solid asset bases in the Marcellus and Utica Shales as
well as the Williston Basin (WB). We believe a renewed focus on the drill
bit and deleveraging the balance sheet (with further asset sales) should
continue to act as positive catalysts for the stock going forward.
Investment highlights
 Growth continues to be driven by the Marcellus and Utica. The
company expects to bring on a third rig here in the near future, and
wells targeted to be brought online between now and YE 2014 are
expected to add ~31 MBoe/d in net production; this is greater than
the company’s entire output from continuing operations in Q1/14.
MHR remains comfortable with its 2014 production exit rate
guidance of 32.5 MBoe/d from continuing operations.
 MHR continues to build up the value of its Eureka Hunter
midstream business. As of April 2014, the Eureka Hunter’s
gathering flow through recently hit a peak rate of 236 MMcf/d. With
the completion of expansion projects currently under construction,
the company expects that Eureka Hunter will have a throughput
capacity of 1.2 Bcf/d by YE 2014.
 The company has done a good job enhancing its liquidity. As of May
6, 2014, MHR had total liquidity of ~$131.2M. To further enhance
its liquidity, the company is pursuing additional non-core asset
sales. It expects to close such potential sales throughout the
remainder of 2014. MHR has already sold its Canadian WB assets
for US$68M, which is expected to close this week.
Valuation
Our $10 price target represents a 20% discount to a ~$12.50 NAV

Moody’s Shale Gas – Sector Review

eeking Alpha via dynect-mailer.net 

11:52 AM (7 minutes ago)

to me
 as reported by Seeking Alpha April 1
not great review for Quicksilver

Moody’s: Marcellus shale gas producers to benefit most • 2:51 PM

  • Marcellus shale gas producers will benefit more than producers elsewhere in the U.S. because of several favorable circumstances, even if prices were to decline to 2012 levels, according to a Moody’s report.
  • Anadarko Petroleum (APC), Southwestern Energy (SWN) and Chesapeake Energy (CHK) – all of which entered the play early during a weak natural gas price environment – especially have benefited, Moody’s says.
  • An infrastructural overhaul is still needed as buyers move away from traditional production hubs such as the Haynesville and Barnett, the credit rating agency says; the transition already has caused a decline in credit quality for Exco Resources (XCO), Forest Oil (FST) and Quicksilver Resources (KWK).

Penn Virginia Corporation Analyst Day Update

PVA : NYSE : US$10.40
BUY 
Target: US$12.00

COMPANY DESCRIPTION:
Penn Virginia Corporation is an exploration and production company with operations in Texas, the Mid-Continent, Appalachia and Mississippi.
All amounts in US$ unless otherwise noted.

Energy — Oil and Gas, Exploration and Production
ANALYST DAY HIGHLIGHTS-RISING EF STAR, RAISING PT TO $12
Investment recommendation
PVA has successfully transitioned to a liquids-focused company while retaining its leverage to an improvement in natural gas prices. PVA has built a sizeable position in the volatile oil window of the Eagle Ford (EF) Shale for a company its size, and has generated solid results with the drillbit while bringing costs down at the same time.
Investment highlights
 PVA held an Analyst Day (and a half) in Texas on November 19/20 . The meetings, which included a field trip to three EF well sites, reinforces the view that PVA is one of the top ways to play this leading shale play, with a growing position now over 70K net acres and results that continue to get better, with 30 day rates increasing and cost continuing to come down.
 While the event was taking place, Devon announced the $6B acquisition of EF player GeoSouthern. PVA was a leading gainer on the news, a recognition we believe of its growing prominence in the EF and relative closeness to GeoSouthern’s acreage. Backing out production at ~$75K/flowing daily Boe, we value the transaction at ~$25K/acre.
 In October 2013, the company’s borrowing base was increased from $350M to $425M. Pro forma liquidity at September 30, 2013 was ~$330M, up from ~$300M at June 30, 2013. The company plans to raise up to $250M from non-core assets sales in H1/14 to enhance liquidity further.

Devon Energy / GeoSouthern Energy

DVN : NYSE : US$62.77
BUY 
Target: US$86.00

COMPANY DESCRIPTION:
Devon Energy is an oil and gas E&P company with assets in the U.S. and Canada. The company also has a significant midstream operation. It is headquartered in Oklahoma City, OK.
All amounts in US$ unless otherwise noted.

Energy — Oil and Gas, Exploration and Production
REPORTED GEOSOUTHERN ACQUISITION WOULD BE POSITIVE
Investment recommendation
We view the possible acquisition of GeoSouthern Energy very positively since it would give DVN added running room to grow its oil volumes from a new position in the Eagle Ford Shale. A deal would bolster the already solid U.S. oil production growth it is getting from its emerging Permian and Miss-Woodford plays. We believe that greater oil growth and a higher mix of oil as a share of its total output are key elements to DVN receiving a higher valuation for its deeply undervalued E&P business.
Key points:
 Acquisition would substantially add to DVN’s U.S. oil production:
U.S. oil currently accounts for 12% of DVN’s total volumes and we project growth of 31% in 2014 and 23% in 2015. This deal would likely increase DVN’s oil production by a significant amount, as GeoSouthern is the 4th largest oil producer in the Eagle Ford. The private company produced 23 MBopd in 2012 – that amount alone would increase DVN’s U.S. oil volumes by over 25%.
 GeoSouthern has a very attractive acreage position in the Eagle Ford from being a “first mover” in this play: GeoSouthern has a 50% working interest in 173,000 gross acres in the Black Hawk field; its partner is BHP Billiton. The company also has 68,000 net acres further north in Fayette County.
 Eagle Ford is a great fit for DVN’s shale expertise: DVN famously was first to develop on a “mass manufacturing basis” in the Barnett Shale (TX); we believe it could achieve similar results in the Eagle Ford.
 DVN’s very strong balance sheet allows for a $6B acquisition: DVN’s net debt/cap ratio (pro forma for the Crosstex deal) is just 18%. With $4.3B of cash on hand, we believe the company is very much able to not only grow this asset quickly, but acquire other assets as well.

Northern Oil and Gas

NOG : NYSE MKT : US$17.11
BUY 
Target: US$19.00

COMPANY DESCRIPTION:
Northern Oil and Gas engages in acquisition, exploration, exploitation, and development of oil and natural gas properties in the US Rocky Mountains. Its core focus is the Middle Bakken formation in the Williston Basin of Montana and North Dakota. Its secondary focus is Red River and Mission Canyon formations in Montana

Energy — Oil and Gas, Exploration and Production
RAISING ESTIMATES AND PRICE TARGET FOLLOWING Q3 PRODUCTION BEAT
Investment recommendation
NOG is a Williston Basin (WB) Bakken/Three Forks pure-play with a non-operated model. The company is one of the largest non-operating participants in the play and a natural clearinghouse for non-operated working interests. We see good value in the stock and believe a resumption of production growth, which is now happening, should be the recipe for a higher share price.
Investment highlights
 NOG announced that Q3/13 production is expected to average ~13MBoe/d, a 19% Q/Q increase. This soundly beat our 12.2 MBoe/d and consensus of 12.3 MBoe/d. During the quarter, the company added 147 gross (12.1 net) wells to production with an additional 260 gross (18.8 net) wells that were drilling or awaiting completion at the end of the quarter. NOG had a producing well count at the end of the quarter of 1,585 gross (133.5 net).
 NOG expects Q3 realized price per Boe, including the effect of settled derivatives, to be in a range of $82.00 – $83.00, and its LOE to be in a range of $9.50 – $9.75/Boe.

Gulfport Energy Target Price $ 80

GPOR : NASDAQ : US$65.59
BUY
Target: US$80.00

COMPANY DESCRIPTION:
Gulfport Energy Resources is an Oklahoma City, OK, headquartered E&P with core producing assets in the Utica shale and Louisiana Gulf Coast (West Coast Blanche Bay and Hackberry fields). Gulfport also has equity interests in Diamondback Energy (Permian Basin), Grizzly (Alberta Oil Sands) and Tatex II & III (Phu Horm gas field in Thailand). GPOR has additional acreage in the
Bakken and Niobrara.
All amounts in US$ unless otherwise noted.

Execution hiccups expected in early stage of play 
GPOR presented at Canaccord Global Resources Conference on Oct. 17, the day after it provided Q3 actual prod and an exit rate for YE13. GPOR’s Q3 prod at ~13mboepd beat its earlier guidance due to midstream improvements that caused some recent wells to come online earlier than expected.

After the Q3 update, GPOR’s stock has fallen ~3.5% due to a reduced expected exit rate (27-32mboepd). Notably, the exit rate has been lowered due to ~10 wells that will be hooked in early Jan. ‘14 instead of by YE13. A loss of mud circulation in the vertical section between the surface casing and the “heel” caused GPOR to install intermediate casing in these wells. GPOR felt it could avoid the casing in the majority of its wells and save $1mm/well. Instead, now it will run a “formation integrity test” on each well by pumping high-pressure water and checking for any loss in circulation.

GPOR expects to case half of its wells going forward. With the delay, we model 27mboepd for Q4/13 and 14mboepd FY13. On another note, Q3 prod showed a higher yield of gas (vs. NGLs), but with cryogenic facilities coming online soon, we will
expect NGL yield to improve.
Q3 Preview:

With prod updated, focus shifts to dry das activity GPOR also disclosed that it picked up 9,000 gross acres, mostly in the
dry gas window. In our discussions, the acreage was acquired at $7,000/acre, which could be a highly accretive deal given the big wells expected from the area and 100% of dry gas hedged at ~$4/mcfe. Now focus turns to the Irons well; we expect very early rates on the call.
Positives balance negatives
We model Utica on the basis of GPOR’s acreage in the oil/ wet gas/ condensate/dry gas windows. Upside to the recent deal is balanced by completion delays and lower WI next year. We maintain OUR price target, but consider recent weakness as a strong buying opportunity.

Sanchez Energy : Eagle Ford Play

SN : NYSE : US$24.92
BUY 
Target: US$30.00

TAKING IT UP A NOTCH IN THE EAGLE FORD; REITERATE BUY,
LOWERING PRICE TARGET TO $30
Investment recommendation
With over 140K net acres in the oil window of the Eagle Ford (EF) Shale, no company is more levered to the play relative to its size. Substantial production and cash flow growth should be the drivers to a higher stock price, in our view, as the company is now in full-scale development mode in the EF. A newly established 40K net acre position in the Tuscaloosa Marine Shale (TMS) provides future upside potential.
Investment highlights
 The company’s production growth is accelerating. After producing 1.9 MBoe/d in all of 2012, Q2/13 production was 7.7 MBoe/d with only one month of Cotulla. Current production pro forma for the Wycross acquisition is ~15.5 MBoe/d. Exit rate guidance for 2013 suggests a doubling or more from Q2/13 levels.
 SN is entering the TMS with a 40K net acre position in the core of the play that the company believes has over 200 MMBoe of recoverable resource. That said, over 90% of drill and complete (D&C) capex in 2013 is earmarked for the Eagle Ford as SN lets others test the TMS in the short to intermediate term.
 Both the recent equity and high-yield financings were upsized due strong demand. Pro forma for the sale of 9.6M shares of common and $200M of 7.75% Senior Notes, SN has over $500M of liquidity heading into an accelerated production growth phase.

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