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The long-term fundamental outlook for oil and gas mergers and acquisitions in North America is the best it's been in the past 20 years, which is very good news for investors and energy companies. This view was expressed by Bobby Tudor, chairman and CEO of Houston-based investment bank Tudor, Pickering Holt & Company, on November 13 at the IHS Herold Pacesetters Energy Conference in Washington, DC.

Based on this comment, I screened recent oil and gas merger and acquisition announcements. Here is a look at three companies that I found.

1. ZaZa Energy Corporation (ZAZA) is a publicly traded exploration and production company with primary assets in the Eagle Ford and Eaglebine resource plays in Texas.

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News

ZaZa announced on November 14, that it has entered into a definitive share purchase agreement with Vermilion Energy (VEMTF.PK), whereby Vermilion, through its wholly owned subsidiary Vermilion REP SAS, will acquire 100% of the shares of ZaZa Energy France SAS for a purchase price of approximately $85.8 million, subject to customary closing adjustments, with an effective date of October 1, 2012, and an anticipated closing prior to year-end 2012.

Financials

The company reported the third-quarter financial results on November 13, with the following highlights:

Revenue$207.2 million
Net income$133.8 million
Cash$24.6 million
Debt$94.1 million

As of November 1, 2012, after giving effect to the receipt of net proceeds of the convertible note offering in October, 2012, and funding of overhead, operating and capital expenditures, the company had $48.7 million of cash and cash equivalents. The company anticipates capital expenditures of approximately $23.8 million for the fourth quarter of 2012, primarily to drill a 2nd exploration well on its Eaglebine acreage and participate in three non-operated wells in the Gonzales/Fayette County Prospect.

My analysis

The stock jumped 50% after the news. There is only one analyst rating with a $4.50 price target. The acquisition is expected to close prior to year-end 2012. The stock could be trading in a range of $2-$2.5 after the closing of the deal.

2. Lone Pine Resources (LPR) is engaged in the exploration and development of natural gas and light oil in Canada. Lone Pine's principal reserves, producing properties and exploration prospects are located in Canada, in the provinces of Alberta, British Columbia, and Quebec, and in the Northwest Territories.

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News

Lone Pine Resources announced on November 13, that its wholly owned subsidiary, Lone Pine Resources Canada Ltd., has entered into a definitive agreement with a large Canadian energy producer to dispose of all of its interests in the Wild River area of the Deep Basin of Alberta for total gross cash proceeds of $82.0 million, subject to normal course closing adjustments. The transaction has an effective date of October 1, 2012, and is expected to close in mid-December 2012.

Financials

The company reported the third-quarter financial results on November 13, with the following highlights:

Revenue$38.2 million
Net loss$124.3 million
Cash$0.2 million
Debt$426.8 million

Net loss for the third quarter of 2012 was impacted by the non-cash effect of a ceiling test write-down of $142.9 million before tax.

My analysis

The stock is currently trading at its 52 -week lows. There have been 11 insider buy transactions and there have not been any insider sell transactions this year. There are four analyst buy ratings, five neutral ratings and 0 sell ratings with a average target price of $9.33. The company has a book value of $4.39 per share. The transaction is expected to close in mid-December 2012. The stock spiked at $1.35 after the deal was announced. I have a bullish bias for the stock currently.

3. Harvest Natural Resources (HNR) is an independent energy company with principal operations in Venezuela, exploration assets in Indonesia, West Africa, China and Oman, and business development offices in Singapore and the United Kingdom.

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News

Harvest Natural Resources announced on June 21, that its wholly owned subsidiary, HNR Energia B.V., has signed a definitive Share Purchase Agreement [SPA] with PT Pertamina, the national oil company of Indonesia, to sell all of the company's interests in Venezuela for $725.0 million in an all-cash transaction. Net proceeds from the sale are estimated to be approximately $525.0 million after deductions for transaction-related costs and taxes.

The buyer will purchase Harvest's 32 percent interest in Petrodelta, S.A. by purchasing HNR Energia B.V.'s 80 percent interest in Harvest-Vinccler Dutch Holding B.V. The effective date of the transaction is January 1, 2012.

The closing of the transaction is subject to, among other things, approval by the Government of the Bolivarian Republic of Venezuela, the Government of Indonesia in its capacity as the buyer's sole shareholder and a majority of the company's stockholders. If all of the conditions to closing are not satisfied or not waived on or before March 21, 2013, either the buyer or Harvest may terminate the SPA. The Boards of Directors of Harvest and Pertamina have each approved the transaction.

Financials

The company reported the third-quarter financial results on November 9, with the following highlights:

Net income$5.8 million
Cash$20.4 million
Debt$9.0 million

On October 12, 2012, Harvest sold $79.8 million aggregate principal amount of 11% senior unsecured notes due October 11, 2014.

My analysis

The stock has a $19 price target from the Point and Figure chart. There are three analyst buy ratings, two neutral ratings and 0 sell ratings with an average target price of $11.17. The stock is trading at a forward P/E ratio of 11.65. The company has a book value of $10.45 per share. The Petrodelta transaction value is over $12 per share after tax. The deal is expected to close on or before March 21, 2013. The closing of the transaction is subject to approval by the Government of the Bolivarian Republic of Venezuela, and the Government of Indonesia. I believe the stock could be trading above $10 after these country approvals, which could happen already this year.

Source: 3 Oil And Gas Stocks With Recent Acquisition Deals