Author Topic: CDEV - Centennial Resource Development  (Read 930 times)


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CDEV - Centennial Resource Development
« on: October 08, 2019, 07:14:37 PM »
Anyone following this company of Mark Papa? Here are a few points on why this is a good value at $3.6/share today. Iím looking for people to tell me what Iím missing, and what the risks are at this price point.

1) Mark Papa is probably one of the most well regarded E&P CEOs in the fracking world. I have read two books on fracking and listened to several interviews. All of them regarded Mark Papa as a CEO who stood out because he actually earned above industry returns for shareholders.
2) Mark Papa uses GAAP net income and GAAP ROE to measure his company's performance.
3) CDEV is a pure play Permian mid cap. It's acreage is well above average. Itís debt level is among the lowest among its peers. Itís drilling result is definitely  above average. Itís spacing is claimed by Mark Papa to be conservative throughout its 3 year history.
4) Yet, if you take the PDP value published at the beginning of the year (granted the oil curve back then was a bit higher than today), subtract it from the EV, you will be getting CDEVís acreage for almost free. Permian basin acre averages around 12K to 17K today. At the price, CDEV is worth $9/share. The stock is at $3.6 today, about 30% of book.

One thing that bothers me is despite of all the talk, Mark Papa has never purchased shares on the open market. CDEVís CFO spent $250K last year and another $250K this year buying the stock at $16/share and $4.5/share. I checked Mark Papaís insider transaction history at EOG, it seems he is not the kind of person that buys stock on the open market. I would appreciate anyone who has experience investing with Mark Papa in the past to comment on this.

CDEVís most recent presentation sums up the investment case very well.
« Last Edit: October 08, 2019, 07:38:53 PM by Parsad »