The Corporate Restructuring Report-Bonanza Creek Energy Inc (BCEI) Update
Bonanza Creek Energy Inc. (BCEI) emerged from Chapter 11 bankruptcy on April 28, 2017. We initiated coverage on May 12, 2017 with a bullish stance and continue to like its prospects.BCEI recently reported better-than-expected 4Q17 results with both sales and EPS, beating analyst estimates. The full year 2017 production (at 16MBoe/d) exceed the high end of the management guidance range (15-15.7 MBoe/d).
We believe that Bonanza Creek offers an attractive way to play the Denver-Julesburg(DJ) Basin. With a fairly contiguous 67,000 net acre position in Wattenberg Field, the company has a sizable, high quality asset to exploit. A comparative basin study confirms superior operational predictability at DJ vs other basins. BCEI is well postitioned for double digit production growth in the near term, driven by increasing activity and use of enhanced completion techniques at its fields in the Wattenberg. The management expects overall production to grow in the range of ~10% - 17% YOY in 2018.
Besides this, the company's high rural acreage positions it to better navigate the increasing regulatory scrutiny faced primarily by counterparts with higher urban acreage. We note that SandEnergy Inc. had made an offer to acquire BCEI for $36 per share in November, 2017, much higher than the current market price of $27.41. However, that deal didn't materialize. In our view, the stock is undervalued at current levels.
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