Could These Other Marcellus Shale Companies Be Acquired?

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 |  Includes: ATLS, CHK, COP, CVX, RRC, XCO, XOM
by: Benzinga

By Roger Nachman

The big news headline this morning is Chevron Corporation (NYSE:CVX) is purchasing Atlas Energy, Inc. (NYSE:ATLS) to gain a presence in the Marcellus Shale, which is the largest natural gas field in the United States.

Chevron obviously believes in the field, or it wouldn't be paying a 35%+ premium for Atlas. Exxon Mobil (NYSE:XOM) already purchased a major player in the Marcellus Shale, XTO Energy, last year.

It's obvious that the major oil & gas companies are paying increasingly more attention to domestic drilling opportunities, especially in the natural gas area.

Here are a few other companies that are actively participating in the Marcellus Shale, and could potentially be acquired by one of the other major oil companies, perhaps ConocoPhillips (NYSE:COP).

Chesapeake Energy (NYSE:CHK) is the largest player in the Marcellus Shale, and continues to be, despite the entrance of the super majors in the space.

Chesapeake is reasonably valued, trading at 8.6 times forward earnings. It yields 1.3%, but there are concerns over whether Chesapeake can sustain its business model, as it is essentially a hedge fund operating as a natural gas company. It consistently hedges its contracts, and this is potentially unsustainable going forward.

Range Resources (NYSE:RRC) is another major player in the Marcellus Shale, as it has 900,000 acres in the space.

Range Resources is one of the fastest growing players in the space, and looks to be fairly valued at this time. Given the conservative nature of the industry, it doesn't appear likely that this name would be in play, despite owning some of the most choice areas in the space.

The last company that is being considered is EXCO Resources Inc. (NYSE:XCO).

This one seems to be the most likely of the three companies mentioned. It's trading at an absurdly low valuation, has a manageable market cap ($4 billion), and is already in talks to go private. The company's CEO bid $20.50 for all of the outstanding shares in the company, but given the fact that this space is getting more attention now, perhaps a company like COP swoops in with a better offer. Douglas H. Miller, the company CEO, knows he is getting a steal of a deal at a $20.50 purchase price, and it's up shareholders to decide whether he gets to steal it away for practically nothing, or if another company proves to be a knight in white satin armor.

Disclosure: No positions