Between its acquisition of Devon Energy's
The moves prompted me to assess how ATP Oil & Gas
If you're not familiar with W&T Offshore, this is a company that's focused on the Gulf of Mexico shelf. Of the company's top 10 fields at year's end, only one was out in the deepwater. W&T Offshore recently reported holding an interest in 77 producing fields spread across the Gulf, so its asset base is far less concentrated than that of ATP Oil & Gas or Contango Oil & Gas
Let's start with a reserve-based comparison. If we apply last week's two Apache transaction multiples to W&T Offshore's reserves, we get an estimated value range of $1.3 billion to $1.6 billion. This comes in somewhat above W&T Offshore's enterprise value (market cap plus net debt) of $1.25 billion, but is nothing exciting.
Slightly complicating matters is the recently proposed acquisition of two operated deepwater fields from Total
Moving to production, the Devon shelf properties sold for around $55,000 per flowing barrel and Mariner went for around $62,000 per daily barrel equivalent of production. The Devon asset is a better match for W&T Offshore's production profile, so let's use that as our guide. Again, production from the Total assets is something of a question mark, because we only know the assets' year-end gross production averages. If this deal closes, W&T Offshore should be producing somewhere around 250 Mmcfe per day. That would suggest a value of around $2.29 billion, compared with a pro forma enterprise value of $1.4 billion.
This latter comparison suggests that W&T Offshore is priced at a significant discount to recent transaction multiples. There are many reasons why a discount might be warranted, though:
- The company hasn't managed much growth over the past five years.
- Profitability has dropped (though management sees margins moving closer to historical levels in 2010).
- Insiders control 58% of the stock, and the man in the big chair might not feel like giving up his $1 million base salary anytime soon.
If the company's not for sale, that would render this comparable transaction-based valuation approach rather moot. Please consider all of the foregoing a starting point, rather than a definitive judgment on the value offered here.
Fool contributor Toby Shute doesn't have a position in any company mentioned. Check out his Motley Fool CAPS profile or follow his articles using Twitter or RSS. The Motley Fool has a disclosure policy.