FBR Capital Cuts Price Target on Carrizo Oil & Gas (CRZO) Following Announced Eagle Ford Shale Acquisition
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FBR Capital maintained an Outperform rating on Carrizo Oil & Gas (NASDAQ: CRZO), and cut the price target to $50.00 (from $51.00), following the company's announced acquisition in the Eagle Ford Shale for $181 million. The package consists of 15,000 net acres with 80 net risked drilling locations in close proximity to CRZO’s existing position in the play. In conjunction, the company is offering 6.0 million common shares, or 6.9 million including the shoe. This represents dilution of nearly 12%.
Analyst Chad Mabry commented, "After the close on October 24, Carrizo Oil & Gas announced an acquisition in the Eagle Ford Shale. The deal expands its position within its core operating area to over 100,000 net acres and increases its drilling inventory in the play by 10% to approximately 1,100 net locations. From our perspective, an implied purchase price of roughly $6,000/acre or $1.1 million per location should be much more palatable to investors than equivalent metrics in the Permian. In conjunction, the company reported 3Q16 production of 40.8 Mboe/d, beating both our forecast of 39.4 Mboe/ d and the consensus of 39.2 Mboe/d. We affirm our Outperform rating on CRZO shares, although our price target slips to $50 (from $51) on deal-related dilution to NAV."
Shares of Carrizo Oil & Gas closed at $38.87 yesterday.
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