ljmi, When bidding on another publicly held company, E&P companies rarely have paid very much for undeveloped acreage in the past and even if we had $10 gas I don't think that would happen too much now. The point here is that its cheap money to tie up all kinds of acreage with mineral leases or options on mineral leases, and you can always find some geologist to write a report for you telling you there could be half a TCF of gas in them thar hills.
So in the relatively short window of time that you normally have to do due diligence for an acquisition of a public company, you could never satisfy yourself as to just how good all those prospects are. So they end up getting discounted pretty heavily.
That being said, a company with a large amount of acreage and, more importantly, seismic on that acreage, is in the drivers' seat now, for several reasons. Carrizo Oil (CRZO) has an enormous amount of seismic for a company its size. At year-end, out of a total of about $145 M of book cost of its oil & gas properties, $40 M of that is in unproven properties.
I would not be surprised if a larger company that is looking for a way to get more drilling going does not approach CRZO and offer to enter into a JV where CRZO could contribute its undeveloped acreage and seismic data into the JV and the other company would contribute cash plus maybe some other explorationists to help work the data, and voila, they could drill out that stuff in 1 year instead of the 4 years that CRZO would take.
BTW, if you still are on an "acquisition premium" kick and don't mind buying _really small companies, take a look at Miller Exploration (MEXP). This once proud tiger is now in its last days of being marketed for sale, and their reserves are down to a paltry 6 BCFE or so, and going down fast from there. They have some interesting undeveloped prospects, and the question is whether they can find anyone who cares. In any event the market is just valuing the company at a buck an mcf so there would seem to be little downside to the stock price at this point. |
