Energy takeover talk focuses on Northern Oil & Gas, Approach Resources

|About: Approach Resources Inc. (AREX)|By:, SA News Editor

There's ample reason to expect some consolidation among the patchwork quilt of small U.S. exploration and production companies drilling for oil, Barron's writes, focusing on two stocks that could rise at least 50%.

A buyer could pay up for Northern Oil & Gas' (NOG -3.7%) cash flow, broad acreage holdings, and its knowledge of multiple operators in the Bakken Shale; using NOG's enterprise value of ~$1.5B, it trades at just 5.4x trailing EBITDA, while larger Bakken peers are trading at ~9x.

Another attractive buyout candidate is Approach Resources (AREX +0.4%), which owns some of the cheapest reserves in the Permian Basin; AREX's assets likely are worth a good deal more given the rich price recently paid by Sinochem for a 40% stake in Permian player Pioneer Natural.