Endeavor Energy for Sale

tpltblogger5 Comments

Chevron, Exxon Mobil Weigh Bids for Endeavor Energy

There is talk that XOM or COP could by Endeavor for up to $15B.  Endeavor is a Midland based producer that owns 320k net mineral acres.

$15B / 320k acres = $46,875/acre.

TPL owns 24,028 net acres in mineral rights.  (Acreage x 1/16 or 1/128).

At that rate, TPL’s mineral rights business is worth $1.13B.

Adjusting TPL’s $4.65B market cap for the $1.13B = $3.52B for all surface land and revenues derived thereof.  Surface land @888k acres = $3,963/acre.

Said another way, the mineral business is worth $144 share.

So what would you pay for all that land and $200MM+ a year top line (soon) from water, sundry, and easements?

5 thoughts on “Endeavor Energy for Sale”

  1. I am thinking, how can one compare Non participating Royalty net acres with Drilling rights for net acre calculation? Its comparing apples to oranges in my opinion. Non participating royalty rights of TPL are lot more valuable when compared to just the drilling rights as they have to spend about $30 per barrel for extracting O&G.

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  2. very good point! what factor can we put on it? 2x the net acreage to account for the difference? Is 2x too much? Regardless, any number over 1 really changes the economics on what is left.

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  3. Assuming 50% (In reality maybe 25% max) of the net TPL royalty acreage is already drilled, I would put 3-4X net acreage to account for the difference. Currently TPL revenue $30M every quarter just in O&G royalties excluding Water & Sundry income.

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  4. I believe your $/net royalty acre valuation is completely inaccurate.. ORRI are worth significantly more on a net royalty acre basis then undeveloped acreage that needs invested capital to extract value, also that undeveloped acreage prob has less than 100% Working Interest.. Case in point, VNOM (Viper Energy) acquired 2,457 net royalty acres in 3Q18 at a cost of $260MM or ~$106k pre net royalty acre.. At that valuation TPL’s net royalty acreage would be worth $2.55B or ~$326 per share.. If you want to take even one step further VNOM currently owns 13,908 net royalty acres and the current EV of the company is ~$4B which would put their $/net royalty acreage value at ~$290k.. Using this $/net royalty acre value would imply that TPL’s royalty acreage should be valued at ~$6.9B or ~$885 per share.. Which means that if you were to buy TPL today you would essentially be getting their net royalty acres at a 35% discount to VNOM and also receive the rest of their business (water, easement & sundry) for free.

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