IPO Report: Vantage Energy (VEI)

Francis Gaskins |

Vantage Energy (VEI) a growth-oriented, independent oil and natural gas company engaged in the acquisition, development, exploitation and exploration of oil and natural gas properties in the United States, with a focus on the Marcellus Shale. It is headquartered in Englewood, CO,

Eightother companies are scheduled for the week of Sept. 22, 2014.  The full IPO calendar is available at IPOpremium.

Manager, Co-managers: Barclays, Goldman Sachs, Citiggroup, Scotiabank Howard Weil, KeyBanc Capital Markets, MUFG

VEI scheduled a $600 million IPO with a market capitalization of $1.8 billion at a price range midpoint of $25.50 for Thursday, Sept. 25, 2014 on NYSE.  SEC flings

VEI IPO Overview

VEI a growth-oriented, independent oil and natural gas company engaged in the acquisition, development, exploitation and exploration of oil and natural gas properties in the United States, with a focus on the Marcellus Shale

As of August 31, 2014, VEI had two drilling rigs operating in the Marcellus Shale and two rigs operating in the Barnett Shale and expects to operate approximately that same number of rigs for the remainder of 2014.

VIE has a 100% success rate (defined as the percentage of completed wells which produce in commercially viable quantities) based on producing wells.

Valuation

Glossary

Valuation Ratios

Mrkt Cap ($mm)

Price /Sls

Price /earnings

Price /BkVlue

Price /TanBV

% offered in IPO

Adj for derivatives loss  taxes, June 6 mos

     

Vantage Energy (VEI)

$1,845

17.7

87.0

1.4

2.2

33%

Adjusted EBITDA multiple

34.2

     
             

Rice Energy (RICE)

$4,120

11.3

17.2

3.5

5.1

 

Eclipse Resources (ECR)

$2,890

28.3

-11.1

2.4

3.5

 
             

Conclusion

The rating is neutral.

VEI has a 100% success rate (defined as the percentage of completed wells which produce in commercially viable quantities) based on producing wells.

As of April 30, 2014, VEI had 1,074 identified drilling locations, including 423 in the Marcellus Shale, 312 in the Upper Devonian Shale and 339 in the Barnett Shale.

However, VEI is expensive in terms of traditional valuation metrics.

Business

VEI a growth-oriented, independent oil and natural gas company engaged in the acquisition, development, exploitation and exploration of oil and natural gas properties in the United States, with a focus on the Marcellus Shale, where VEI holds a concentrated acreage position in what VEI believes to be the core of the play in Greene County, Pennsylvania.

Additionally, VEI has a sizeable position in what it believes to be the core of the Barnett Shale. VEI believes these areas are among the most prolific unconventional resource plays in North America, and are generally characterized by high well recoveries relative to drilling and completion costs, predictable production profiles, significant hydrocarbons in place and favorable operating environments.

Marcellus Shale

As of August 31, 2014, VIE had 53 gross horizontal wells drilled in the Marcellus Shale, 46 of which are operated by VEI. Of those 53 wells, 25 were on production, 4 were temporarily shut-in for drilling and completion operations and the balance were either awaiting completion, in the process of being completed or completed and awaiting pipeline.

VIE has a 100% success rate (defined as the percentage of completed wells which produce in commercially viable quantities) based on producing wells. As of April 30, 2014, VIE had 423 identified drilling locations in the Marcellus Shale.

Barnett Shale

As of August 31, 2014, in the core operating areas of the Barnett Shale, VEI had 119 gross horizontal wells drilled, excluding those that have been plugged or shut-in.

Of those 119, 84 were on production, 6 were temporarily shut-in for drilling and completion operations and the balance were either awaiting completion or in the process of being completed.

VEI has a 100% success rate in its core operating areas of the Barnett Shale. As of April 30, 2014, VEI  had 339 identified drilling locations in the Barnett Shale.

$549 million capital budget allocated to:

• $403 million for drilling and completion;

• $90 million for leasehold acquisitions;

• $5 million for seismic and other activities; and

• $52 million related to our gathering, compression and dehydration construction activities.

Management

VEI’s management team has a proven track record of implementing technically driven growth strategies to target best-in-class returns in some of the most prominent unconventional plays across the United States. Roger Biemans, VEI’s Chairman and Chief Executive Officer, and Tom Tyree, VEI’s President and Chief Financial Officer, founded VEI with investments from affiliates of Quantum Energy Partners, Riverstone Holdings LLC and Lime Rock Partners.

VEI made its initial entry into the Barnett Shale in 2007 and the Marcellus Shale in 2010. Since then, VEI has been committed to a strategy of disciplined growth through acquisitions and development drilling in the highest quality areas of these plays.

VEI utilizes advanced well completion strategies and technologies, including pad drilling and downhole rotary steering, to optimize well economics and operational efficiencies.

VEI believes that its horizontal drilling and completion expertise, coupled with the favorable geologic characteristics of its Marcellus and Barnett Shale acreage, positions VEI for continued strong results and growth. VEI has grown its net daily production from 18.1 MMcfe/d for the year ended December 31, 2011 to 63.3 MMcfe/d for the year ended December 31, 2013, representing a compounded annual growth rate of 86.8%. VEI’s estimated average net daily wellhead production for the month of August 2014 was 150.4 MMcfe/d.

VEI has assembled a largely contiguous acreage position of 57,545 net acres in what VEI believes to be the core of the Marcellus Shale in Greene County, Pennsylvania.

In addition, VEI’s Barnett Shale assets consist of approximately 38,499 net acres, 23,398 of which are located in what VEI believes to be the core of the basin in Denton, Wise and Tarrant Counties in Texas.

As of August 31, 2014, VEI had two rigs operating in the Marcellus Shale and two rigs operating in the Barnett Shale and expects to operate approximately that same number of rigs for the remainder of 2014.

As of April 30, 2014, VEI had 1,074 identified drilling locations, including 423 in the Marcellus Shale, 312 in the Upper Devonian Shale and 339 in the Barnett Shale.

Competition

The oil and natural gas industry is intensely competitive, and VEI competes with other companies in its industry that have greater resources than VEI does.

Many of these companies not only explore for and produce natural gas, but also carry on refining operations and market petroleum and other products on a regional, national or worldwide basis.

These companies may be able to pay more for productive natural gas properties and exploratory prospects or define, evaluate, bid for and purchase a greater number of properties and prospects than VEI’s financial or human resources permit and may be able to expend greater resources to attract and maintain industry personnel.

In addition, these companies may have a greater ability to continue exploration activities during periods of low natural gas market prices.

VEI’s larger competitors may be able to absorb the burden of existing, and any changes to, federal, state and local laws and regulations more easily than VEI can, which would adversely affect its competitive position.

VEI’s ability to acquire additional properties and to discover reserves in the future will be dependent upon its ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment. In addition, because VEI has fewer financial and human resources than many companies in its industry, VEI may be at a disadvantage in bidding for exploratory prospects and producing natural gas properties.

5% shareholders pre-IPO

Vantage Energy Investment LLC 49.0%
Vantage Energy Investment II LLC          51%     

Dividend Policy

No dividends are planned.

Use of proceeds

VEI intends to use the $378 million in proceeds from its IPO along with cash on hand as follows:

Repayment of Vantage I revolving credit facility                          $111.0M           

Repayment of Vantage I second lien term loan              $209M 

Repayment of Vantage II revolving credit facility              $20M  

Repayment of Vantage II second lien term loan               $100M

 

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
VEI Vantage Energy Inc n/a n/a n/a 0

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