Asset Valuation of Extraction Oil & Gas

Asset Valuation of Extraction Oil & Gas

On June 14, 2020, Extraction Oil & Gas (XOG) announced that the company filed for Chapter 11 to relieve its debt burden of nearly $1.5 billion. The company has obtained $125 million in debtor-in-possession financing facility underwritten by Wells Fargo and has entered into a restructuring support agreement with certain unsecured noteholders in a debt-for-equity swap (source: globenewswire).

A full reserve report and economic results for Extraction’s assets will be provided in this blog.

The estimated market value of the assets based on LandGate’s analysis is $1.58 billion. In Extraction’s 10Q report released May 11, 2020, the company reported its net oil and gas properties to be valued at $2.2 billion (source: Extraction Form 10-Q). Based on Extraction’s Q2 2020 earnings report, the company’s total debt is $1.59 billion making it’s net asset value -$12.2 million.

LandGate uses its advanced technology to analyze the current asset value of Extraction and associated acreage. These same tools are available to any PowerVal subscriber, which offers users accurate allocated production data, geological interpretation, forecasting, and automated engineering. All of these processes are simplified down to an efficient workflow with PowerVal.

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LandGate provides third party certified reserve reports and engineering services. Contact us for more information or see more of our corporate services.

Asset Overview

LandGate estimates Extraction’s July 2020 net cash flow to be $30,749,200 per month. Forecasted PDP net reserves totaled 41.5 MMbbl Oil, 278.3 BCF, and 35.9 MMbbls NGLs. 2P and 3P reserves shown in Figure 6 below. Extraction has 950 producing wells, 148 Drilled Uncompleted wells, and at least 380 permits in the DJ Basin. As of January 2020, the wells were producing 57,561 bbl/d oil and 364.5 MMcf/d gas at a gross level.

LandGate provides a geological snapshot of the formations being produced and permitted by Extraction and groups the locations by well type. See Figure 3.

LandGate’s DJ Basin Strat Column with Extraction’s Assigned Locations
Figure 3. LandGate’s DJ Basin Strat Column with Extraction’s Assigned Locations

LandGate included PDP, PUD and Probable reserves in the reserve report. Based on Extraction’s development and LandGate analysis, we used a horizontal well spacing of 650 ft to model additional drilling locations that have not been permitted (upsides). 

Each area, formation, and lateral length has a unique type curve. One of the more common type curves in Extraction’s operating area is the Niobrara 1.5 mile horizontal type curve shown below in Figure 4.

LandGate’s Niobrara 1.5 mile horizontal type curve
Figure 4. LandGate’s Niobrara 1.5 mile horizontal type curve
Automated Upside Locations
Figure 5. Automated Upside Locations

Type Curve Parameters

IP: 500 BOPD & 2.2 MMcf/d

EUR: 213 Mbbl oil, 1.7 BCF gas, 232 Mbbls NGLs=

Extraction has significant reserves in drilled uncompleted wells in addition to undrilled acreage. 

LandGate’s PowerVal software enables users to model upsides in seconds. In the DJ Basin, PowerVal auto assigns undeveloped well locations so that all undeveloped well modeling can be done in minutes. See Figure 5.

Economic Results

Figure 6 below shows the estimated oil and gas reserves for PDP, PDNP, PUD, PROB, and POSS (3P) as well as future net revenue to Extraction Oil & Gas as of 07/01/2020 using the 6/23/2020 NYMEX futures.

Automated Upside Locations
Figure 6. Reserve Report Summary
Figure 7. Net Cash Flow Summary and Net Production
Figure 7. Net Cash Flow Summary and Net Production
Gross Forecast (Cumulative).
Figure 8. Gross Forecast (Cumulative)

Download the full reserve report and supporting files for Extraction Oil & Gas.

Ownership: 77% WI and 61.6% NRI

Price Deck (NYMEX WTI CL 06-23-20; Henry Hub NG 06-23-20)
Figure 9. Price Deck (NYMEX WTI CL 06-23-20; Henry Hub NG 06-23-20)

With its roots as a technology and engineering company formerly named PetroValues, LandGate provides valuation research for its clients as well as software tools for buyers of oil and gas and other property rights.

Check out the combined research of LandGate and Probus Energy Services.

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