Possible Oil and Gas Buyouts
ConocoPhillips (NYSE: COP) has been refocusing its strategy in order for the company to grow in the future. The way that they plan to do this is by selling off assets in order to add more focus towards deepwater acquisitions. With the hopes of acquiring in the U.S., Canada, Eastern Europe, and China. Deepwater opportunities is where CEO John Mulva is planning on taking the company, and these are the the three stocks predicted for buyout.
ATP Oil & Gas (Nasdaq: ATPG)
ATP is an exploration and production company focusing on deepwater in the Gulf of Mexico and the North Sea. Unlike most of its peers, ATP takes the “E” out of the equation. It does this by buying proven, yet undeveloped, offshore fields and bringing them into production. ATP Oil & Gas has long caught my eye. Last year, ATP Oil & Gas was expected to drill four wells that would transform the company into a cash flow machine. The company finished one well early in the year, but then the disaster in the Gulf of Mexico with Transocean‘s Deepwater Horizon happened, and all drilling ceased. Drilling has since resumed.
Kodiak Oil & Gas (AMEX: KOG)
Kodiak is an E&P focusing on the Bakken in North Dakota and Montana. The company is sitting on 69,000 net acres and currently has 17 net wells producing oil. The firm currently has two drilling rigs operating and will add a third this quarter. The Bakken has an advantage over other formations in that it sits above the Three Forks-Sanish formation, which also produces oil. This means a company can use the same drill to reach two formations, with the potential to significantly increase oil production across the same acreage.
Buying Kodiak would make sense for ConocoPhillips since it would be acquiring acreage in a developing nonconventional oil play. While not as large as Continental Resources, Kodiak is a digestible size for ConocoPhillips and wouldn’t eat up its entire acquisition budget, which is estimated to be $13 billion.
Ultra Petroleum (NYSE: UPL)
Ultra Petroleum is an E&P focused on Wyoming’s Green River Basin and Pennsylvania’s Marcellus. Notably, the company has some of the lowest production costs in the business, averaging roughly $2.61 per mcfe compared with the industry average of $5.41. Like Range Resources (NYSE: RRC) , its capital structure and breakeven drilling costs enable it to withstand the natural gas market’s cyclicality. While most operators are losing money at today’s $4 price for natural gas, Ultra is one of the few that still is making money. This is important to investors and Ultra’s management team, which has an obsession with investment returns. CEO Michael Watford has said Ultra wants to “make money first and … grow second.”
These companies could possibly be facing buyout in the future. However, as always, do your research on the topic and keep up on the current events unfolding. This due diligence will be your best bet in making the right choices for your portfolio.
Reported by Dan Dzombak, Read the entire article here.
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