Robert Rapier (an EPG member) has updated his article on potential Permian Basin takeover targets. Several Sweet 16 companies are on the list.
Read: https://oilprice.com/Energy/Energy-Gene ... rmian.html
Takeover make a lot of sense in periods of rising oil prices.
> Large-caps can easily absorb the targets and eliminate a lot of G&A expense
> Large-caps have much lower cost of capital, so they can payoff the high interest rate debt of the target
> All of the Tier One leasehold is leased up, so takeovers are the only way that large-caps can meaningfully increase their positions in high profile areas like the Permian Basin
> Proven Reserves are extremely cheap on Wall Street these days
Takeover Targets
Takeover Targets
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Takeover Targets
Dan,
After reading that article I was amazed that there was no mention of any "gassers" as potential takeover targets. The author did state that Shell was moving toward natural gas expansion so it would make sense that RRC, AR, and maybe EQT would be possible acquisitions. They are at net positive FCF and low earnings multiples with ample long-term reserves. As you have stated previously, the Marcellus/Utica NG Stocks do not have the market bottlenecks that the Permian companies do. I know natgas is out of favor, but is it not the right time for some one to be buying those assets? What am I missing?
Steve
After reading that article I was amazed that there was no mention of any "gassers" as potential takeover targets. The author did state that Shell was moving toward natural gas expansion so it would make sense that RRC, AR, and maybe EQT would be possible acquisitions. They are at net positive FCF and low earnings multiples with ample long-term reserves. As you have stated previously, the Marcellus/Utica NG Stocks do not have the market bottlenecks that the Permian companies do. I know natgas is out of favor, but is it not the right time for some one to be buying those assets? What am I missing?
Steve
Re: Takeover Targets
Personally, I think RRC is a "Screaming Buy" takeover target at today's share price. They have over 18 TCFE of proven reserves (P1). Probable (P2) and Possible (P3) may add up to over 100 TCFE of recoverable reserves. Plus, as you point out, it is generating ample free cash flow and has over a million acres of leasehold HBP'd in the world's most important natural gas fields (Marcellus + Utica).
Right now all of the articles at M&A are focused on Permian Basin takeover targets.
Natural gas has been "out of favor" with the Wall Street Gang for several years (despite the profitability of the companies I follow). Takeovers usually require funding and it might be difficult to get the money needed for a takeover of a gasser.
All of the large-caps have teams looking for takeover targets. I was on one at Hess for a few years. My bet is that AR, GPOR, RRC and SWN are on a few "radar screens", just because they are trading at a deep discount to NAV. RRC's NAV is over $24/share.
Right now all of the articles at M&A are focused on Permian Basin takeover targets.
Natural gas has been "out of favor" with the Wall Street Gang for several years (despite the profitability of the companies I follow). Takeovers usually require funding and it might be difficult to get the money needed for a takeover of a gasser.
All of the large-caps have teams looking for takeover targets. I was on one at Hess for a few years. My bet is that AR, GPOR, RRC and SWN are on a few "radar screens", just because they are trading at a deep discount to NAV. RRC's NAV is over $24/share.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group