Global Hunter Securities downgraded Bronco Drilling (NYSE:BRNC) from "Accumulate" to "Neutral" after receiving a takeover bid from Chesapeake Energy (NYSE:CHK).
Global says, "Last Friday, BRNC announced Chesapeake Energy (NYSE: CHK) is acquiring it for $315 million, or $11 per share. The valuation metrics work out to 1.02x BV, 6.9x and 5.1x our 2011 and 2012 EBITDA estimates, respectively, and -$14.3 million per rig, which implies zero value for Bronco MX or Challenger Ltd. CHK is currently BRNC’s second largest customer, operating three rigs. CHK intends to integrate the 22 rigs into its subsidiary, Nomac Drilling, for which CHK operates 90 of its 95 rigs. We believe that many of these rigs will likely be working for CHK in the Powder River and DJ Basins, after completing their current term contracts, where the company recently inked a joint venture with CNOOC (NYSE:CEO) and in the Mississippian horizontal oil play in the northern Anadarko Basin."
"We do not expect a third party to come in with a higher bid for BRNC. We believe that Helmerich & Payne (NYSE:HP) has no interest in running a rig outside of a FlexRig, and Nabors (NYSE:NBR) and Patterson-UTI (Nasdaq:PTEN) are more likely to spend the incremental $4-5 million to build a rig rather than pay the implied $14.3 million per unit CHK is spending for BRNC. We feel the same way for the smaller-cap drillers and do not believe any other operators have an interest in spending over $300 million to guarantee they have rigs to meet anticipated drilling programs and hedge against rate increases."
"Rotate into Pioneer (NYSE:PDC) and Union (Nasdaq:UDRL). Up nearly 70% and 64% YTD, we think these stocks still have plenty of room to run."
Global Hunter Securities lowered its price target on Bronco from $13.50 to $11.
Showing posts with label Bronco Drilling. Show all posts
Showing posts with label Bronco Drilling. Show all posts
Monday, April 18, 2011
Friday, April 15, 2011
Chesapeake (CHK) Acquires Bronco (BRNC) for $316 Million
Shares of Bronco Drilling (NASDAQ:BRNC) were up above 6 percent in trading today on the news Chesapeake Energy Corp. (NYSE:CHK) bid $316.8 million to acquire the company in an all-cash deal.
The acquisition will add a minimum of 22 onshore oil rigs to Chesapeake, boosting its oil production as it waits for natural gas prices to rebound.
Chesapeake Chief Executive Officer Aubrey McClendon said his goal is to expand the company's oilfield services business as a way to control costs on the exploration and production side of the business.
Chesapeake will pay $11 a share for all of Bronco's outstanding stock, a 6 percent premium over Thursday's closing price.
The premium was unusually small, but the rigs Bronco operates are not newer ones, probably the reason for the lower bid, which values the rigs at about $13 million to $14 million each.
Chesapeake was trading at $32.73, up $0.08, or 0.25 percent, as of 1:55 PM EDT. Bronco was trading at $10.99, gaining $0.59, or 5.67 percent.
The acquisition will add a minimum of 22 onshore oil rigs to Chesapeake, boosting its oil production as it waits for natural gas prices to rebound.
Chesapeake Chief Executive Officer Aubrey McClendon said his goal is to expand the company's oilfield services business as a way to control costs on the exploration and production side of the business.
Chesapeake will pay $11 a share for all of Bronco's outstanding stock, a 6 percent premium over Thursday's closing price.
The premium was unusually small, but the rigs Bronco operates are not newer ones, probably the reason for the lower bid, which values the rigs at about $13 million to $14 million each.
Chesapeake was trading at $32.73, up $0.08, or 0.25 percent, as of 1:55 PM EDT. Bronco was trading at $10.99, gaining $0.59, or 5.67 percent.
Monday, November 8, 2010
Bronco Drilling (Nasdaq:BRNC) Could Move on Sold Term Contracts Says FBR
FBR Capital said they're maintaining their "Market Perform" rating on Bronco Drilling (Nasdaq:BRNC), citing potential solid term contracts for newbuild rigs.
"Bronco’s land drilling fleet has been more profitable than expected due to strong daily cash margins and rig day rate improvements giving the stock some momentum. We believe the announcement of newbuild rigs with solid term contracts could be a catalyst for BRNC. We estimate the company should have enough cash flow to build three new rigs in 2011 should it be able to obtain term contracts," said FBR.
In a press release on their most recent quarterly performance, Bronco revealed: "Results for the third quarter of 2010 were adversely affected by several non-recurring charges. These charges were related to the divestment of our well service assets, certain mechanical drilling rigs and ancillary drilling equipment, all of our trucking assets and a one-time loss related to Bronco MX. These items resulted in a pre-tax charge of approximately $28.5 million in the third quarter. Without these non-recurring charges, fully diluted earnings per share for the quarter would be a loss of $0.05."
Earnings per share for the quarter came in at a loss of $0.69 after a loss of $18.8 million.
Bronco closed Friday at $5.40, gaining $0.45, or 9.09 percent. FBR has a price target of $5 on them.
"Bronco’s land drilling fleet has been more profitable than expected due to strong daily cash margins and rig day rate improvements giving the stock some momentum. We believe the announcement of newbuild rigs with solid term contracts could be a catalyst for BRNC. We estimate the company should have enough cash flow to build three new rigs in 2011 should it be able to obtain term contracts," said FBR.
In a press release on their most recent quarterly performance, Bronco revealed: "Results for the third quarter of 2010 were adversely affected by several non-recurring charges. These charges were related to the divestment of our well service assets, certain mechanical drilling rigs and ancillary drilling equipment, all of our trucking assets and a one-time loss related to Bronco MX. These items resulted in a pre-tax charge of approximately $28.5 million in the third quarter. Without these non-recurring charges, fully diluted earnings per share for the quarter would be a loss of $0.05."
Earnings per share for the quarter came in at a loss of $0.69 after a loss of $18.8 million.
Bronco closed Friday at $5.40, gaining $0.45, or 9.09 percent. FBR has a price target of $5 on them.
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