Resolute Energy Corporation (REN) states it was founded in 2004 to "acquire and operate" oil and gas assets. It has a current market capitalization of about $555 million, which puts it in a position to buy energy assets or a smaller oil and gas company. Many companies have found fast-growth and success by buying other companies and assets when the time is right. With oil and natural gas prices trading at attractive levels and with many energy stocks trading at or near 52-week lows, it makes sense that merger and acquisition deals will be coming. The company website clearly states it is looking to make acquisitions, and it states:
Resolute is continuously searching for opportunities where it can bring its combination of engineering, geological and financial skills to bear. Resolute's management and staff pride themselves on their ability to evaluate and act quickly on complicated transactions. Resolute typically prefers to acquire assets and acreage where there is operational intensity, where it can establish or expand core holdings and where it can act as operator. Resolute is interested in onshore U.S. assets.
While most investors consider this company to be an acquirer, some recent developments could turn the tables and Resolute could even find itself to be an acquisition target. A recent GeoResources, Inc. (GEOI) buyout offer could be a possible catalyst for a deal with Resolute as these two companies already have formed a joint venture in 2010, in the Bakken, to explore and develop approximately 61,000 gross acres in Williams County, North Dakota. GeoResources was recently sought to be acquired by Halcon Resources (HK) primarily for its holdings in the Bakken range. As one article points out:
Some of GeoResources's assets are located in Williston's Bakken formation, which the U.S. Geological Survey said in April 2008 may contain as much as 4.3 billion barrels of technically recoverable oil under western North Dakota and eastern Montana. "The primary reason for the deal is to get Halcon a starter kit in the Williston Basin," Butler said in a telephone interview. "That's going to be one of the most important oil basins to the U.S. energy supply for the next generation. Halcon sees that and therefore wants a position in it.
Halcon has clearly seen the value in GeoResource's stake in the Bakken, and that could mean that the market will see more value for Resolute's holdings in this same Bakken range. Whether or not this company is ever acquired remains to be seen but, it seems clear that Resolute will continue to pursue acquisitions and joint ventures that can position it for rapid growth. One potential joint venture partner for Resolute could be Dejour Energy (DEJ) which has the "Rangely" projects and other acreage that could fit it's needs but also because Dejour's CEO already sold his Australian Oil Fields company to Resolute.
With Resolute stock trading below book value, which is $8.70 per share, these shares look undervalued. Resolute shares are also trading for about half the 52-week high, which might not last for long based on the recent deal for GeoResources.
Here are some key points for REN:
Current share price: $8.57
The 52 week range is $8.09 to $16.69
Earnings estimates for 2012: 9 cents per share
Earnings estimates for 2013: 14 cents per share
Annual dividend: none
Disclaimer: Data is sourced from Yahoo Finance. No guarantees or representations are made. Please consult a financial advisor before making investments.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.