IPO Report: Jones Energy (JONE)

Francis Gaskins |

Based in Austin, TX, Jones Energy ($JONE) scheduled a $252 million IPO with a market capitalization of $918 mllion at a price range mid-point of $18, for Wednesday July 24, 2013.

S-1 filed July 11, 2013

Manager, Joint Managers:  J.P. Morgan; Barclays; Wells Fargo
Co Managers:  Jefferies; Tudor, Pickering, Holt; Citigroup; Capital One Southcoast; Credit Agricole CIB;  Mitsubishi UFJ Securities; Morgan Stanley; Stifel; SunTrust Robinson

Summary

JONE is an independent oil and gas company engaged in the development, production and acquisition of oil and natural gas properties in Oklahome and Texas.


JONE has an aggressive drilling plan, see ‘Growth Plan ‘ below.  That’s necessary because prove reserves showed little growth into 2012 from 2011.

In terms of current performance, Q1 ’13 earnings were $295,000, down from $23 million for the 2012 year.

Valuation

Based on comparative ratios JONE appears to be priced in-range.

Valuation Ratios

IPO Mrkt

Price /

Price /

Price/

Price /

% offered

annualizing Q1 '13

Cap (mm)

Sls

Erngs*

EBITDA*

BkVlue

in IPO

Jones Energy (JONE)

$918

4.2

765.0

4.9

1.4

27%

*Based on 2012 yr

 

 

40

 

 

 

 

 

 

 

 

 

 

COMPARE

IPO Mrkt

Price /

Price /

Price/

Price /

Dividnd

annualizing Q1 '13

Cap (mm)

Sls

Erngs

EBITDA

BkVlue

Yield

Jones Energy (JONE)

$918

4.2

765.0

4.9

1.4

none

Bonanza Creek Energy (BCEI)

$1,600

5.1

36

8.3

2.7

none

Linn Energy LLC (LINE)

$5,860

4.0

-6.6

17.2

1.4

11.5%

Chesapeake Energy (CHK)

$14,500

1.1

63

3.9

0.9

1.6%

 

 

 

 

 

 

 

             
             
             

Glossary: http://gaskinsco.com/glossary.htm

Over the three months the charts for industry segment companies BCEI, LINE and CHK were mixed.

Conclusion

Because the future depends on successful drilling and increasing reserves, the rating on JONE is neutral to negative at the price range mid-point of $18.

JONE is an independent oil and gas company engaged in the development, production and acquisition of oil and natural gas properties in the Anadarko and Arkoma basins of Texas and Oklahoma.

In the Anadarko and Arkoma basins, JONE has drilled over 580 total wells, including over 400 horizontal wells.  Asset overview  

As of December 31, 2012, total estimated proved reserves were approximately 85 MMBoe (million barrels of energy), of which  46% were classified as proved developed reserves. 55% of total estimated proved reserves as of December 31, 2012 consisted of oil and NGLs (Natural Gas Liquids), and 45% consisted of natural gas.  Reserves 

Roll-up (growth by acquisitions)

JONE completed three significant acquisitions as well as several bolt-on acquisitions in its operating areas over the last three years. The aggregate purchase price of recent acquisitions is over $710 million.

Recent developments

On April 9, 2013 JONE entered into a new joint development agreement with an affiliate of Vanguard Natural Resources, LLC to drill and develop horizontal Woodford shale formation wells in an area of mutual interest, or AMI, covering 360 sections (230,400 gross acres) in Hughes and Pittsburg counties, Oklahoma.

JONE will have the potential to drill up to 360 locations under this joint development agreement in sections where Vanguard Natural Resources currently has an interest.

Since completing the Chalker acquisition in December 2012, JONE have increased our Cleveland rig count from two rigs to six rigs and plans to increase the total rig count to as many as eight rigs by January 2014.

Growth plan

JONE intends to drill 93 gross wells in 2013, a 94% increase from the 48 gross wells drilled in 2012. JONE has identified 2,372 additional gross drilling locations in areas of operation for 2014 and beyond, which JONE believes will enable it to drill and develop its resource base for many years. JONE believes that the commodity pricing environment will remain challenging for 2013, particularly for natural gas and NGLs

Organization

JONE was incorporated as a Delaware corporation in March 2013. JONE is a shell holding copany whose sole material asset will consist of 14,000,000 units, in Jones Energy Holdings, LLC, or JEH LLC .

As the sole managing member of JEH LLC, Jones Energy, Inc. will be responsible for all operational, management and administrative decisions relating to JEH LLC's business and will consolidate the financial results of JEH LLC and its subsidiaries.

Organization chart

  

Competition

Bonanza Creek Energy (BCEI)
Chesapeake Energy ($CHK)
Linn Energy LLC (LINE)

Compare recent stock charts:

  

Dividend policy

No dividends

5% Stockholders pre-IPO

Metalmark Capital Partners, 62%
Jones family entities, 35%

Metalmark Capital is a leading private equity firm with over 20 years of experience. It manage both its own funds and the Morgan Stanley Capital Partners funds, on a subadvisory basis.

Use of proceeds

JONE expects to receive $232 from it's IPO.

The shell company JONE will use the proceeds to buy units from the entity that controls operations.   That money will be used to repay senior debt that bears a  variable interest rate of 3.3% per annum.

$130 million of that debt was incurred for the recent Chalker acquisition.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
AEBMY Anadolu Efes Biracilik ve Malt Sanayi AS (Turkey) n/a n/a n/a 0
BCEI Bonanza Creek Energy Inc. 0.92 0.05 5.83 1,568,763
CHK Chesapeake Energy Corporation 6.23 -0.39 -5.89 83,665,778
JONE Jones Energy Inc. Class A 2.82 -0.20 -6.62 2,208,449
LINE Linn Energy LLC Unit Repstg Ltd Liability Co Ints n/a n/a n/a n/a

Comments

Emerging Growth

CohBar Inc.

CohBar Inc is a research stage biotechnology company. The Company conducts investigational research into Mitochondrial-Derived Peptides to evaluate their therapeutic potential through in vitro and in vivo models.

Private Markets

Pinterest

Pinterest is a visual discovery and planning tool. Users ("Pinners") use the site and apps to get ideas for their future, such as recipes, places to travel, and products to…

XY Find It

Founded by serial entrepreneur Arie Trouw, XY Findables follows a single guiding principle: customers should never lose anything important again. With over 50,000 users around the world, more than 100,000…