UPDATE: Societe Generale Reiterates Buy Rating, Raises PT on QEP Resources

In a report published Friday, Societe Generale reiterated its Buy rating on QEP Resources QEP, and slightly raised its price target from $33.00 to $34.00. Societe Generale noted, “After yesterday's close, QEP announced it bought a package of Williston Basin (Bakken and 3 Forks formation targets) assets in Williams and McKenzie counties in North Dakota for $1.38bn. The deal provides 10.5mboe/d of current net production and 125mmboe 2P reserves (81% crude) from 27,600 net acres (80% net revenue interest). The deal will be financed from cash on hand and its $1.5bn credit facility. Prior to this announcement, QEP owned 90,400 net acres in the Williston and had expressed interest in growing its overall oil and liquids opportunity set. The company had admitted earlier in the year that it had evaluated several marketed packages, but had difficulty, previously, meeting its internal investment hurdles. Based on our analysis of the purchase price and incorporating a 2013 capital plan that is similar to 2012 in amount and mix, the deal is modestly accretive to our NAV estimate, 2012/2013 estimated earnings, and 2012/2013 estimated EBITDAX. If we assume a $70K per flowing barrel (conservative in our view given the high oil cut) for the current production, we arrive at an adjusted finding cost for the 2P reserves of $6.75/boe, which is reasonable in our view. Development costs for the undeveloped locations is a little under $11mn/well, which is around current industry average.” QEP Resources closed on Thursday at $27.18.