We are now in the hurricane season in the United States and this weekend we saw many of the Gulf of Mexico producers shut in production and evacuate their production platforms. It appears that oil shall move above the $100/barrel benchmark and natural gas prices should probably also increase. Isaac is categorized as a Tropical Storm right now and is expected to be no higher than a Category 1 hurricane when it does come ashore. In this situation the platforms will most likely not be damaged but the real worry is the underwater infrastructure as the pipelines have a tendency to get thrashed around by the currents from these storms.
Oil & Natural Gas
Today it is all about the Bakken…
This is because QEP Resources (QEP) announced that they were purchasing approximately 27,600 acres in total in prime Bakken land which is contiguous and will be operated by the company. The land package is located in a prime area for both the Bakken and Three Forks formations and already has numerous wells with production in place. The company agreed to pay $1.4 billion for the acreage, but that figure also includes the infrastructure in place, so dividing the entire figure by the acreage does not give one a good idea of the total paid per acre. The acreage does have more gas production than other parts of the basin, but investors cheered the deal with the company's shares rising $1.62 (5.96%) to close at $28.80/share on volume of 5.4 million shares. The company is still looking for acquisitions at the correct price and raised their full year outlook to factor in the production from the deal.
After this acquisition was announced analysts began looking for other takeout targets and we heard the names Oasis Petroleum (OAS) and Triangle Petroleum (TPLM) thrown around. Triangle would be one of the smaller and more digestible acquisitions which is probably why its shares rose $0.27 (4.12%) to close at $6.82/share. Oasis rose only $0.53 (1.84%) to close at $29.41/share and it is one of the larger acquisitions one would have to digest, thus making it a target of the big boys we would guess.
Much like Kodiak Oil & Gas (KOG) which everyone has figured would be taken out sooner rather than later due to their drilling results over the years and the production base they have built. Shares rose $0.33 (3.73%) to close at $9.17/share on the news and volume rose to 8.9 million. The stock also crossed over the $9/share level we discuss often and appears to be back in bull mode with the acquisition news and oil prices increasing due to the storm in the Gulf.
One other interesting play could be Denburry Resources (DNR) which saw shares rise $0.19 (1.24%) to close at $15.56/share on volume of 3.3 million shares. This company has essentially doubled production from the Bakken from the 2nd Quarter of 2011 to the 2nd Quarter of 2012. According the company's most recent investor presentation they have about 200,000 net acres in the play with most of those in their core holding and a small portion in an extension play. This is a pretty well run company with plenty of firepower for exploration if needed but management likes to run this conservatively with their cap-ex not exceeding free cash flow.