Jagged Peak Energy Has 'Cracked The Code' To Drilling In The Delaware Basin

Imperial Capital initiated coverage of Jagged Peak Energy Inc JAG, pointing out that the company is a first mover in the Delaware Basin.

The firm initiated coverage with an Outperform rating and a one-year price target of $18, suggesting 29 percent upside.

Analyst Irene Haas noted that the company began drilling its first well on the eastern margin of the Delaware Basin in 2013, proving that the Wolfcamp Shale is oily and prolific in area that other producers tended to avoid.

As such, the analyst estimates the company has about 72,000 net acres and 1,400 drillable locations in the southern Delaware Basin in Texas. The analyst believes the company has some of the best margins in this play.

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According to Imperial Capital, the company's Wolfcamp A and B wells can yield 1.2 MMboe, with an 82 percent oil mix. The firm estimates that the oily production mix allows the company to break-even with the WTI grade crude oil price at $28.50 per barrel for a 9,000' lateral in the Whiskey River and Cochise areas.

Additionally, the firm said it expects more positive news from JAgged Peak's delineation wells in Wolfcamp C and the Second Bone Spring Shade.

Giving the rationale behind its investment thesis for Jagged Peak energy, Imperial Capital said:

• Continued execution resulting in multiple expansion.
• Early entry, thanks to the contrarian fault bounded model, with the entry made at attractive prices.
• Highly contiguous land base, operating 90 percent and 97 percent of working interest.
• Strong balance sheet and copious liquidity to fund growth.