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Strategies & Market Trends : Speculating in Takeover Targets -- Ignore unavailable to you. Want to Upgrade?


To: richardred who wrote (3755)9/18/2014 3:36:52 PM
From: richardred  Respond to of 6521
 
Added to MCF today as it broke a new low.



To: richardred who wrote (3755)9/28/2014 11:52:46 AM
From: richardred  Read Replies (1) | Respond to of 6521
 
MCF-Contango Oil & Gas is not mentioned in the story. However, I think its fair to say they could put MCF on their acquisition list. RE-Little kicker. MCF just bought Crimson energy which is right next to some ECA Eagle Ford properties

Encana Cash Puts Halcon to Penn Virgina in Play: Real M&A
By Rebecca Penty and Brooke Sutherland September 24, 2014


Mike McAllister, president of Encana Corp.'s Canada division. Photographer: Stuart Davis/BloombergB

Encana Corp. (ECA), the Canadian energy company that’s shifting production toward more oil, will soon have record cash to spend on crude-rich targets from Halcon Resources Corp. ( HK:US) to Penn Virginia Corp.

Canada’s second-largest natural gas producer is planning this month to sell its controlling stake in PrairieSky Royalty Ltd. The move, along with other asset disposals, will give Encana a $6.6 billion stockpile, according to Deutsche Bank AG. With an improved balance sheet, Encana has the flexibility to be “opportunistic” about purchases as the company shifts output to higher-price oil and liquids from gas, Chief Financial Officer Sherri Brillon said Sept. 9.

Encana could target $1.8 billion Halcon Resources Corp. to grow in the Eagle Ford and Tuscaloosa Marine shale regions or RSP Permian Inc. to expand into the Permian basin, according to Morningstar Inc. MLV & Co. said it may look at Penn Virginia Corp., ( PVA:US) the $868 million Eagle Ford producer that billionaire George Soros’s investment firm encouraged to explore a sale. Should Encana enter the Permian, Athlon Energy Inc. ( ATHL:US) might be a good fit for the $16 billion company, said Sentry Investments Inc.

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“It makes a lot of sense to look at acquisitions,” Lanny Pendill, an analyst at Edward Jones & Co. in St. Louis, said in a phone interview. “The whole name of the game for Encana right now is all about accelerating the transition of the portfolio from predominantly natural gas to a better balance.”

Jay Averill, a spokesman for Encana, declined to comment and cited the company’s policy of not discussing speculation about acquisitions and divestitures.

Production Shift Chief Executive Officer Doug Suttles, at Encana’s helm since June 2013, has been selling gas-producing assets and buying oil- and liquids-rich properties. He’s seeking to rebalance the company’s production after a glut of supply lowered North American gas prices. Long Canada’s largest gas producer, Encana now ranks behind Canadian Natural Resources Ltd.

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Encana will be in the uncommon position for an energy producer of having net cash after the PrairieSky stake sale and the closing of two other transactions expected by the end of the month, Stephen Richardson, an analyst at Deutsche Bank AG in New York, wrote in a Sept. 12 note. It could use that cash to accelerate its transition with purchases in the Eagle Ford shale and Denver-Jules and Permian basins, he wrote.

Shale Oil The company is most likely to make purchases in U.S. shale formations because its Canada positions are already large and can’t quickly provide as much oil production, said Pendill of Edward Jones. Closely held companies may be better priced for Encana than their listed peers, he said.

“You can’t get in just on the ground anymore,” Chad Mabry, an exploration and production analyst at MLV, said in a phone interview. “You have to make a corporate acquisition to get in with scale.”

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Suttles, on a May conference call, said Encana may be comfortable focusing on as many as eight regions, up from its current six.

Penn Virginia would be an attractive Eagle Ford target for Encana, and Halcon Resources, a Houston-based producer with operations in the Eagle Ford, Tuscaloosa Marine shale and Bakken and Three Forks formations, is also appealing, MLV’s Mabry said. Halcon executives have experience with dealmaking, having sold Petrohawk Energy Corp. to BP Plc in 2011, and may be looking to repeat that with Halcon, he said.

Cheap Target Buyers can get Penn Virginia’s more than 100,000 net acres in the region for a bargain as the Radnor, Pennsylvania-based company is cheaper than most of its peers.

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Encana could look to build a presence in the Permian basin in West Texas, where RSP Permian Inc. ( RSPP:US) presents one option for a takeout, said David Meats, a Chicago-based analyst at Morningstar Inc. Dallas-based RSP Permian has a market value of $1.9 billion.

Asset grabs may be hard to come by, so if Encana wants to enter the Permian, it may have to “pay a 30 percent premium and pick up one of the smaller operators,” Meats said. RSP Permian is “definitely a good fit. It’s got very high-quality assets,” though Encana needs to avoid overpaying for an asset or buying anything that’s less than ideal, he said.

Athlon Energy Athlon Energy Inc. also might be a logical target, said Mason Granger, a portfolio manager at Sentry Investments Inc. in Toronto who focuses on energy investments. Athlon, based in Fort Worth, Texas, has a market value of $4.5 billion.

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“Athlon’s all over the place in the Permian,” he said.

Representatives for Penn Virginia, Halcon and Athlon didn’t return phone or e-mail messages seeking comment. A representative for RSP Permian declined to comment.

Encana may be more likely to make “bolt-on” purchases that match recent acquisitions, given it needs to grow production from Eagle Ford properties it acquired for $3.1 billion in June, John Herrlin, an analyst at Societe Generale SA in New York, said in an e-mail. And the deals market in the U.S. remains competitive, he said.

“It remains a property rather than public-company market,” Herrlin said. “Given the recent Eagle Ford buy, it’s likely way too early for them to step up and buy more.”

Encana’s stock isn’t yet reflecting any potential gain from a transaction, according to Deutsche Bank’s Richardson.

“The right asset, at the right price could provide interesting upside and shift the market’s perception,” of Encana, he said.

To contact the reporters on this story: Rebecca Penty in Calgary at rpenty@bloomberg.net; Brooke Sutherland in New York at bsutherland7@bloomberg.net

To contact the editors responsible for this story: Beth Williams at bewilliams@bloomberg.net; Susan Warren at susanwarren@bloomberg.net Whitney Kisling

businessweek.com