Q: Any comments on the announced acquisition and financing?
Jerry
Jerry
5i Research Answer:
The $636M upstream deal is interesting, in that it gives PEY good midstream facilities and infrastructure and diversifies its operations somewhat, as well as giving it operational control of some new areas, with plenty of drilling opportunities. It adds 23,000 b/d (75% gas) with low decline rates. Consider the size of the deal (about 25% of market cap) it makes sense to us to finance part of it with new equity. The balance sheet is still reasonable, and good growth is expected here. The valuation/yield remain attractive.