It puts Statoil in the top 10 holders of Bakken shale along with ConocoPhillps and Exxon Mobil, according to Bloomberg Industries. If people didn't think the state's boom was the big time, this should correct that view.
The sale reflects apparent confidence that oil production in the state will weather uncertainty in Environmental Protection Agency oversight of fracking and air quality issues and congressional deliberations related to the nation's carbon footprint and green initiatives. Confidence of that sort hasn't been seen lately.
Statoil represents 80 percent of Norway's oil production. It's reaching out for Bakken and Three Forks oil, in part, because production in the North Sea has been on the decline, to the extent Norway's oil production has dropped 50 percent since 2000.
The sale of Brigham Exploration to Statoil has generated questions about the price, with some industry analysts and shareholders believing that the $4.4 billion undervalued the American company. The questions may delay Statoil's takeover of the company.
Meanwhile, the Tyler, a third oil-bearing shale formation in western North Dakota and northwestern South Dakota, broke into the news. Early speculation puts the Tyler at about a third of the oil volume as the Bakken. The increased potential for oil production in the area helps leverage the development of pipelines and other infrastructure basinwide.
Expectations are that North Dakota will move ahead of Alaska and California in annual oil production. That would put North Dakota behind only Texas.
Oil production in this state hit 444,142 barrels/day in August, an all-time high. The rig count for August was 192.
n 2008, the USGS projected recoverable oil to be approximately 3.6 billion barrels, with much more technically unrecoverable. More recent unofficial projections tabbed the area closer to 20 billion barrels of recoverable oil.
Other Rumored Takeover Targets
Statoil will gain access to 375,000 net acres in the Williston Basin with its $4.4-billion deal to buy Brigham. The question is, which company may be next on the selling block?
One of the hottest rumors is Kodiak Oil and Gas (AMEX: KOG). It’s a relatively small company with a market cap under 1.5 billion, but recent attention from the Brigham purchase made it a bit expensive with a P/E in the 300s. BMO Capital believes a takeover is likely. According to Flyonthewall.com, “After speaking with Kodiak’s management, BMO Capital believes that Kodiak’s execution risk is dropping while its growth is becoming more visible. In addition, the firm believes that recent acquisitions in the Williston Basin focused attention on the area and may indicate that acquisitions are becoming more prevalent than joint ventures.”
Oasis Petroleum (NYSE: OAS) is another company flooded with attention after Brigham’s purchase. It may currently be overbought, but its P/E is around 100 – three times less than that of Kodiak. It’s also about twice the market cap as Kodiak.
Whiting Petroleum (NYSE: WLL) may be one of the safer bets for investors looking to capitalize on an M&A premium. It holds great position in the Bakken, with more than 500,000 net acres, has a market cap greater than $5 billion, and a P/E is only 17.67. Even if Whiting isn’t acquired, it looks like a much better long-term stock than Kodiak or Oasis.
Bottom Line
While Kodiak and Oasis may very well be attractive targets for M&A, it looks like the Brigham news jacked up the price on both of those stocks. It may even be a smart move to short those companies in case nobody decides to buy.
However, Whiting offers a healthier overall stock and company, and may prove to be a solid investment for shale oil bulls regardless of an acquisition. Additionally, larger companies may find it the most attractive takeover candidate because of the better value and higher net acreage in the region.
All about: Williston Basin Williston, N.D. Williston oil companies New England Patriots
Six figure salaries
No comments:
Post a Comment