Canaccord Genuity Remains Bullish on Emerald Oil (EOX) Following Failed Acquisition and Equity Raise
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Canaccord Genuity reiterates a Buy rating and $12.00 price target on Emerald Oil (NYSE: EOX) following a failed acquisition and equity raise.
Analyst Stephen Berman commented, "EOX has ~122K net acres (80% operated) in the Williston Basin (WB), a very meaningful position for a company of its size. The WB will remain the focus for EOX as an attempt to diversify in the Delaware Basin in the Permian has failed due to the inability to raise the equity, which would have been highly dilutive, to pay for a $75M acquisition to get into that play. While we still see good long term value in the stock, it may take time for the company to regain credibility with the market following the failed acquisition and equity raise."
Berman also added, "EOX had entered into a definitive agreement with privately-held Yates Petroleum and its affiliates to acquire 10,476 net acres in the core of the northern Delaware Basin, in Lea and Eddy Counties, New Mexico for $75.2M. The acquisition needed to close by the end of May, and the plan was to fund it with proceeds from a $150M equity raise. That plan was downsized to $80M with some debt for equity swaps included, and then scrapped entirely due to "the current market environment and associated dilution to existing shareholders." Had the $150M equity raise happened, it could have more than quintupled the number of common shares outstanding."
Shares of Emerald Oil closed at $5.47 yesterday.
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