Cimarex Buys Resolute


$1.6B / 21k acres = $76,190/acre.

Resolute’s 21k acres compares well with TPL’s 24k net acre position though I’m learning that non-operating stakes are generally valued higher.

Anyhow, if we say TPL’s mineral rights are worth $1.6B, the rest of it is worth $2.85B with the stock price at $573.

Royalties were 42% of top line over the nine months ended 9/30/18 and for Q3 by itself.  If we take out the O&G top line from net income (meaning no expenses are attributed to it), we get to a projected quarterly after tax net income of $25.7MM/quarter and $102.6MM/year simply based on Q3 results.  ~$100MM in earnings per year implies a 28 P/E on all non-royalty income.

$63,195k before tax Q3 net income – $31,253k O&G top line = $31,942k projected net income before tax.  After tax, we can estimate it to be $25,657k or $3.30/share.

$25,657k x 4 = $102.6MM in earnings per year.

$2.85B remaining market cap / $102.6MM earnings = 27.7x estimated P/E.

Oh, and the land is worth something too…



4 thoughts on “Cimarex Buys Resolute

  1. It seem like you have some very good information but I have to admit I am not really sophisticated enough to be able to understand what you are saying. Could you possible explain it at a different level? Are you saying that the share price is currently overvalued or undervalued?

    Liked by 1 person

    • Basically what he’s saying is that if you sold their Net Royalty acres for what Cimarex paid for in a similar transaction and then all you had were the easement, sundry, and water income, you arrive at a valuation similar to what we have now of 27x earnings for the remaining market cap. You are basically getting ~890k acres and any O&G royalties for free at this price….so yea, just slightly undervalued. @tpltblogger, please correct me if I am interpreting this incorrectly.

      Liked by 1 person

Comments are closed.