Centennial To Expand In Delaware Basin With Asset Buyout

Centennial Resource Development, Inc. (NASDAQ:CDEV) recently announced its plans to acquire several potential acreages and oil and gas producing properties in the Northern Delaware Basin from GMT Exploration Company (“GMT”). Centennial Resource is likely to pay approximately $350 million in cash for the assets. We note that the company is planning to fund the accord with the proceeds from capital markets transactions.

Following the deal, the upstream energy player boosted its 2020 crude production guidance to 60,000 barrels of oil per day (BOE/D) from the prior projection of 50,000 BOE/D. The increase in target represents a four-year compound annual oil growth rate of approximately 80%. Per the deal, Centennial Resource will gain access to 11,860 net acres in Lea County of Southern New Mexico, thereby increasing its Delaware basin position holding to 88,000 net acres.

The deal will help Centennial Resource significantly as the assets from GMT have the potential of producing 91 million BOE. The current inventory, which Centennial Resource can take advantage from, incorporates drilling locations in four zones. The deal will add around 2,100 BOE/D on an average to Centennial Resource's production. Approximately 77% of this production is oil. About 79% of the total acreage being acquired by Centennial Resource was operated by GMT with 85% working interest on an average. EOG Resources, Inc. (NYSE:EOG) and Concho Resources Inc. (NYSE:CXO) are the largest non-operated partners in these properties.

About the Company

Centennial Resource focuses on the development and acquisition of unconventional oil and associated liquids-rich natural gas reserves in the Permian Basin. The company was formerly known as Silver Run Acquisition Corporation and is headquartered in Denver, CO.

Price Performance

In the last six months, Centennial Resource’s shares outperformed the Zacks categorized Oil and Gas – U.S. Exploration and Production industry. During this period, Centennial Resource’s stock gained 4.4%, while the market witnessed 7.23% decrease.

Zacks Rank and Stocks to Consider

Centennial Resource presently carries a Zacks Rank #4 (Sell). A better-ranked stock in oil and gas sector is Enerplus Corporation (TO:ERF) , which has a Zacks Rank #1 (Strong Buy). You can seethe complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Enerplus Corporation is expected to witness current year sales growth of 66.12% year over year. The company had an average positive earnings surprise of 66.67% in the last four quarters.

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