QEP Resources Prices Stocks To Fund Permian Acquisition

QEP Resources Inc. (NYSE:QEP) , a leading independent energy company, announced the pricing of 20,000,000 shares of its common stock.

The company has priced the stock in a public offering, which is anticipated to close on Jun 27, 2016. Investors should note that the company has extended a 30-day option to underwriters to purchase up to 3,000,000 additional shares of the common stock. The offering will likely generate gross proceeds of $367 million for QEP Resources. Notably, the amount might rise to $422.1 million if the aforesaid option is exercised by the underwriters.

QEP Resources will utilize the net proceeds to partly fund its recently announced acquisition of oil and gas properties in the northern Midland Basin of the Permian Basin for an aggregate purchase price of approximately $600 million.

With the acquisition, the company will add over 430 potential horizontal drilling locations - that spread over 9,400 acres of land - with its existing core Permian Basin properties. The to-be acquired properties have a production capacity of about 1,400 barrels of oil equivalent per day and hold net proved reserves of approximately 76 million barrels of oil equivalent. The deal is slated to close in September but awaits customary closing conditions.

Also, the purchase is expected to help QEP Resources expand into areas where it can capitalize on its operating and technical expertise. In other way round, the to-be acquired resources along with existing assets will significantly improve the company’s future oil production growth prospects. However, if the acquisition is not completed, the net proceeds from the abovementioned offering will be utilized to reduce debt, finance part of the company’s upstream operations and to purchase assets. The remainder, if any, will be allocated for working capital needs.

Denver, CO-based QEP Resources is engaged in the exploration, development and production of natural gas, crude oil and natural gas liquids. We are optimistic about the company’s diversified reserve base in multiple U.S. basins as well as its focused investment in high-return areas such as the Pinedale, Uinta, Bakken and Permian.

However, with crude prices witnessing a freefall since Jun 2014, QEP Resources has been able to extract less value for its products.

As a result, QEP Resources carries a Zacks Rank #3 (Hold), implying that it will perform in line with the broader U.S. equity market over the next one to three months.

Some better-ranked players from the broader energy sector are Braskem S.A. (NYSE:BAK) , McDermott International Inc. (NYSE:MDR) and Sasol Ltd. (NYSE:SSL) . All these stocks sport a Zacks Rank #1 (Strong Buy).