According to analysts, QEP paid the Cox family a rich price for their properties. Tudor, Pickering, Holt & Co. called the deal "expensive" at around $51,000 per acre, versus more than $40,000 for other deals in the area recently. The firm values the company's existing properties in the region at $47,000 if they're fully developed and oil trades at around $50 per barrel long term, leaving "almost no room for upside for the company," it said.
Further, TPH said the capital expenditures required to make the deal even net asset value-neutral would push out the company’s previous target of free cash flow neutrality to 2019. It would also expand its near-term leverage to twice as high as QEP's peers given its recent sale of its Pinedale producing properties, the proceeds from which it's using to pay for these new assets.
Raymond James analyst John Freeman said the deal is one of the most expensive the market has seen in two years, narrowly missing the $55,000 per acre that QEP spent to pick up other properties in the area last year. He does note, however, that the new transaction comes in at $970,000 per drilling location versus last year's deal at $1.2 million. Freeman has the stock at a strong buy 1 rating.