What's Left of Delta Petroleum After the Sale? (DPTR)

Delta Petroleum Corporation (NASDAD: DPTR) is one of the top market gainers today on news that the independent oil and gas exploration and development company entered into a non-binding letter of intent for a partial sale.  The agreement is with Opon International LLC to sell a 37.5% non-operated working interest, in the Vega Area assets in the Piceance Basin.  The total consideration was $400 million, but this was larger than the company’s entire market capitalization.

If you want to know why the stock is not up even more, it is because the ‘value’ is not able to entirely be put back to holders.  Delta said that it expects $225 million of the total consideration to be used to fund the development of the Vega Area over the next three years. On top of that, there is a stock transaction here.  Delta agreed to issue open warrants to purchase 13.3 million shares of Delta common stock at $1.50 per share and then for 5.7 million shares at $3.50 per share, upon closing of the deal.  In short, there is going to be some share dilution here.  Dilution at lower prices.

Delta also noted that it intends to use the rest of the total consideration for its balance sheet obligations and general working capital purposes.  Enough of telling the news.  Delta has divested some of its non-core property interest.  What we really want to see is what else the company has up its sleeve.  Its full list of properties is here and we wanted to look into these.  Just keep in mind that these are listed as 2008 levels, so some may be different and some or portions of some may have been divested.

• The Vega area, Colorado is the Piceance field under development and was listed as 21,500 acres. The 2009 cap-ex was listed as $35 to $45 million there on its site.  The Piceance Basin in Garden Gulch, Colorado is 2,000 acres with a 31% weighted interest.
• The development projects in Texas are Newton Field, TX is 21,000 acres with a 92% working interest and the Midway Loop TX is 21,400 acres with a 28% working interest.
• The DJ Basin in Colorado and Wyoming is listed as 21,800 acres with a 100% working interest.
• The Wind River Basin in Howard, WY is is 47,000 acres under development with a 50% working interest.
• The Paradox Basin in Colorado and Utah is 97,300 gross acres with a 70% working interest, but that is production and exploration.
• Then there are two exploration interests listed.  One is The Central Utah Hingeline and one is the Columbia River Basin.

Its 2009 Annual Report was not yet seen, but it listed in 2008 at follows:

Proved Reserves-

• Oil, consolidated and NGLs (MBbls) 9,453
• Nat-Gas (MMcfe) 827,677
• Nat-Gas Equivalents (MMcfe) 884,395
• Percent Developed 21%
• SEC PV-10 After Tax $159.368 million

Annual Production-

• Oil (MBbls) 993
• Nat-Gas (MMcf) 18,948
• Nat-Gas Equivalents (MMcfe) 24,908
• Reserve/Production Ratio in Years 35.5
• Production Replacement 2,143%

Delta is no stranger to volatility.  Its 52-week trading range is $0.73 to $4.68.  This used to be a $10 to $20 stock and traded even as high as about $30 back in the oil and gas bubble days.  Delta still has value to it, but it also has the shot of much dilution that can offset other deals it may enter.

Thomson Reuters has estimates at -$0.40 EPS and 110.65 million in 2010 and -$0.32 EPS on $136.68 million in 2011.

Again, on our quest to find how much more there is you need to keep in mind that the data is per the 2008 Annual Report data on its site.  As far as who Opon is, more data is here at their site.

JON C. OGG