Mergers

[dan_s]

Chesapeake Energy’s nearly $4 billion acquisition of WildHorse Resources marks a pivot point for the company. That’s what Chesapeake CEO Doug Lawler told the audience at the Deloitte Oil and gas Conference in Houston this week—just hours after news broke of the mega-deal in the Eagle Ford.

In case you missed it, Chesapeake Energy said it will acquire WildHorse and assume its net debt of $930 million. Chesapeake has been on an oil-focused growth platform. Lawler said the acquisition complements the company’s existing high-margin Eagle Ford and Powder River Basin positions. He expects 80% of the company’s future drilling and completion activity will be directed toward high-margin oil opportunities.

Encana will combine with Newfield Exploration, which is set to place Encana as North America’s second largest producer of unconventional resources. Following the close of its combination with Newfield, Encana expects liquids production will contribute over 50% of total company production, driving continued margin expansion and returns.

Also, Denbury Resources will acquire Penn Virginia in the Eagle Ford Shale in an all-stock transaction valued at about $1.7 billion, which includes associated debt.
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I believe that this is just the beginning of up to 10 to 12 mergers that we see announced by year-end. Several of our Sweet 16 and Small-Cap Growth Portfolio companies are Prime Targets.

[mkarpoff]

This does not excite me. So many of your faves are so cheap that even with a 25% premium over trading price they would sell for way less than your fair value. I would much rather hold them through 2020, and see if your estimates are correct.

[dan_s]

I was not recommending them. I was just passing on that I think we may see several more mergers announced.