Bakken Shale Stocks Likely To Catch Buyout Frenzy $AXAS $CRED $HK $MHR $WLL
A great way to play exploration & production plays is to focus on stocks with core assets in plays such as the Bakken Shale or the Eagle Ford Shale that have a high chance of getting acquired or bought out by a larger competitor.
Earlier this year, Forestar Group made an offer to purchase Credo Petroleum (CRED) for $146 million in cash, which at the time was a 33% premium. Credo has very good Bakken acreage but it is basically a play on its Kansas and Nebraska vertical plays. It has 80,000 net acres of shallow, low-cost wells with IRR better than its Bakken acreage. It also has 15,500 net acres targeting the Mississippian.
Halcon (HK) also purchased a Bakken player in GeoResources. The majority of its acreage was in western Williams County where the middle Bakken is shallow and well costs are lower. Halcon now has 55,000 net acres in North Dakota and Montana. 40,000 net acres is operated. I don’t think investors understood GeoResources and this is why Halcon was able to purchase the company at such a value.
In the first part of this series, I went over my top two Bakken buyout targets. Oasis (OAS) and Kodiak (KOG) would be a great fit for a large number of oil and gas producers. In part three, I covered ConocoPhillips (COP), Chevron (CVX) and Exxon’s (XOM) potential buys of Continental (CLR)and Whiting (WLL). These two companies have a very large acreage in the Williston Basin, and would be a nice addition.
Magnum Hunter (MHR) is another interesting way to play an acquisition. From a production standpoint, Magnum has done a very good job. It has acreage in the Bakken, Eagle Ford, Marcellus and Utica shales. The Eagle Ford is by far its best acreage. Magnum has 26,000 net acres, all of which is in the oil window. 18,712 net acres are located in Gonzales and Lavaca counties. Gonzales County is arguably the best acreage in the Eagle Ford. It surrounds EOG Resources’ (EOG) leasehold, which has by far the best wells in the play. Its acreage in Gonzales would command top dollar to be acquired.
Abraxas (AXAS) is another name I like with an outside chance of acquisition. This oil producer is difficult to like given its bearish chart. On February 24th of this year, it traded for $4.34/share. It now trades for $2.07/share and did not rally with other oil producers over the past two months. It also has small acreage positions spread over six different plays, which must be difficult to manage.
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