Takeover Targets

[dan_s]

Sweet 16: GEOI + BEXP, CRZO, DNR, CLR, ROSE
Watch List: NOG, MHR, TPLM and KOG

BHP Billiton (BHP) agreed to pay $15B ($12B in cash and $3B in assumed debt) for Petrohawk (HK) late Thursday July 14, 2011. This amounted to $37.25/share. A huge premium given HK closed Thursday at $23.49/share. This effectively raises the prices on all of the oil leases in the major oil shale plays. HK had its acreage spread between the Haynesville, the Eagle Ford, and the Permian Basin. Most of its assets were in natural gas.

The most recent major buys in the Eagle Ford were for approximately $20,000 per acre. The most recent major buy in the Bakken was for approximately $17,000 per acre. These prices are far above the prices of just 1-2 years ago. These were probably $2000/acre or lower. Many oil exploration stocks with lease holdings in these areas are now far undervalued on a mark-to-market basis. A few of the companies that look like attractive buyout targets are: Northern Oil and Gas Inc. (NOG), Magnum Hunter Resources Corp. (MHR), Triangle Petroleum Corp. (TPLM), Kodiak Oil & Gas Corp. (KOG), and GeoResources Inc. (GEOI).

NOG has 162,000 net acres in the Bakken. MHR has 81,250 net acres in the Bakken and 25,046 net acres in the Eagle Ford. MHR also has 91,870 net acres in the Appalachian Basin of which 56,595 net acres are overlying the Marcellus Shale. Upon completion of the NGAS and NuLoch acquisitions, MHR will have 397,020 net acres in Appalachia, 81,250 net acres in the Bakken, and 51,423 other net acres, which include 50,680 net Alberta acres. TPLM has 72,000 net acres in the Bakken with plans to extend that to 100,000 net acres by the end of 2011. TPLM also has 412,924 net acres in a Nova Scotia play. KOG has 70,000 net acres in the Bakken, 413,00 net acres in the Windsor Block of Nova Scotia, Canada, and 7,000 net acres in the Green River Basin. GEOI has 46,000 net acres in the Bakken, and 24,000 net acres in the Eagle Ford. GEOI also has 29,000 net acres in the Giddings Field -- Austin Chalk, 2,585 net acres of HBP and 534 net acres of owned minerals in the St. Martinville Field, and 14,000 gross acres in the Quarantine Field in LA.

These companies might well draw your attention as stand-alone investments. However, with the added incentive of possible or even likely buyouts of any or all of them by bigger players, they will be that much more attractive. Their share prices will be bid up that much farther. I have only included calculations for the mark-to-market book values of their Eagle Ford and Bakken lease holdings. I have tried to include their other holdings above, although I haven’t attempted to assign values to them.