Commodities Today: Big Buybacks, Mergers And SEC Actions Moving These Stocks

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Includes: BTI, DUK, EVEP-OLD, GLD, HK, LO, MHRCQ, MO, RAI, WPZ
by: Matthew Smith

Summary

EVEP and WPZ have entered a deal that will see WPZ pay $575 million in cash for EVEP's 21% stake in Utica East Ohio Midstream.

RAI & LO are apparently close to receiving regulatory approval to go forward with their merger.

MHR has received a Wells Notice from the SEC.

Oil stocks are rising today, with one of the outperformers attracting our attention being Halcon Resources (NYSE:HK). There is one deal to discuss today that took place in the Utica, but it centers around midstream assets and not acreage or production so it is not really having an impact on the Utica related players.

The one disappointing performer on our watch lists is Magnum Hunter Resources (MHR) which is down today after the company received a Wells Notice from the Securities & Exchange Commission, or SEC. The Wells Notice is in regards to the company's financial reporting issues from 2012 and 2013 and the dismissal of its independent auditor. This is the company's last chance to convince the SEC not to file an enforcement action against the company. Shares in Magnum Hunter are lower by over 9% today as investors react to the news.

Precious metals are the real outperformers on the session, with gold bouncing off of the $1,200/ounce level, silver rising above $17/ounce and platinum adding some breathing room above the $1,150/ounce level.

Chart of the Day:

Gold's rally is being fueled by the weakness in the US Dollar which resulted from the disappointing jobs number from last Friday. Gold is a speculative tool right now, but with that said we are interested to see how far the current rally in gold and gold ETFs such as the SPDR Gold Shares (NYSEARCA:GLD) will run.

Source: Big Charts

Commodity prices are as follows (at time of submission):

  • Gold: $1,221.20/ounce, up by $20.30/ounce
  • Silver: $17.16/ounce, up by $0.459/ounce
  • Oil: $51.63/barrel, up by $2.49/barrel
  • RBOB Gas: $1.8404/gallon, up by $0.0791/gallon
  • Natural Gas: $2.644/MMbtu, down by $0.069/MMbtu
  • Copper: $2.7105/pound, down by $0.0235/pound
  • Platinum: $1,177.00/ounce, up by $23.50/ounce

Utica Midstream Deal

Williams Partners (NYSE:WPZ) and EV Energy Partners (NASDAQ:EVEP-OLD) announced that they have reached a deal that will see Williams pay $575 million in cash to EV Energy to buy its 21% stake in Utica East Ohio Midstream. The deal will give Williams ownership of 70% of the Utica midstream business and provides further liquidity for EV Energy as it deals with falling natural gas and oil prices.

The partnerships' other partner in the UEO midstream project could exercise their option to partake in this sale, in which case Williams would only be purchasing 13% of EV Energy's 21% stake and the other partner would purchase 8%. Either way, EV Energy will receive $575 million for its interest in UEO.

Duke To Repurchase Shares

JP Morgan Chase and Goldman Sachs have each agreed to sell roughly 8.3 million shares of Duke Energy (NYSE:DUK) back to the company as part of an accelerated buyback program of $1.5 billion. The 16.6 million shares being purchased at this time equal about 85% of the total $1.5 billion total and the remaining 15% will be purchased by the end of the third quarter.

While the total number of shares to be repurchased is dependent upon a formula the three parties have agreed to, estimates provided by the company indicate that the total buyback program will result in the retirement of between 2.5%-3% of the company's shares outstanding.

Regulators To Allow Tobacco Merger?

After weeks of speculation it appeared that investors were almost willing to accept reports that regulators were not going to allow the $25 billion acquisition of Lorillard (NYSE:LO) by Reynolds American (NYSE:RAI). After the long weekend though, the thinking is that regulators are going to allow the two companies and British American Tobacco (NYSEMKT:BTI) to either dispose of more assets or reach another compromise that will keep the smaller players in the industry competitive. The companies have already announced plans to sell certain key assets to international players, but based on the latest uncertainty created by the regulators, we would not be surprised to see more assets sold as part of the previously announced package.

To refresh readers on the merger, Reynolds American and Lorillard are the number two and three cigarette manufacturers in the US behind Altria (NYSE:MO). The merger will make the combined company much larger and close in size to Altria which will basically create a duopoly in the United States.

Disclosure: The author is long HK, EVEP.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: DUK has previously been recommended.