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Exxon & XTO Merger Approved: Energy Mergers Galore Coming? (XOM, XTO, BJS, BHI, SLB, SII)

247wallst — Tue, 16 Mar 2010 19:05:56 +0000

When Exxon Mobil Corp. (NYSE: XOM) announced that it was going to acquire XTO Energy Inc. (NYSE: XTO)for $31 billion in an all-stock transaction ($41 billion after debt assumption; with 0.7098 in the XOM/XTO ratio), the first thing that came to mind under the new administration was risks in antitrust issues. The Obama administration was believed to be, and is still believed to be somewhat, much more stringent when it comes to approving mergers and acquisitions. But that appears to be an issue which has come and gone. Hitting the tape this afternoon is that the merger has received the necessary approvals.

BJ Services Company (NYSE: BJS) and the pending acquisition by Baker Hughes Inc. (NYSE: BHI) has yet to face approval as the companies this week announced “The DOJ has raised issues with regard to the overlap between the stimulation/sand control businesses of Baker Hughes and BJ Services in the U.S. Gulf of Mexico.”

As far as what Exxon Mobil said in its filing:

The applicable waiting period provided under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, with respect to the pending merger by which XTO Energy Inc. will become a wholly-owned subsidiary of Exxon Mobil Corporation, expired on March 15, 2010, without the issuance of a second request. The Dutch Competition Authority provided a regulatory clearance of the pending merger on March 9, 2010. Closing of the transaction remains subject to approval by the shareholders of XTO Energy and the satisfaction (or, to the extent permitted by applicable law, waiver) of the other conditions provided in the merger agreement among the parties.

We have gone as far as predicting that Exxon Mobil would hike its dividend in 2010, but the merger here may get in the way of that notion if you consider how much stock it has repiurchased.

The acquisition by Schlumberger Ltd. (NYSE: SLB) of Smith International Inc. (NYSE: SII) is the newest of the three mergers and has yet to hear any formal decisions. Still, it seems that the energy patch is ripe for a new wave of M&A.

It seemed that during the private equity boom that mergers only brought on more mergers. This is true regardless of private equity. The notion that this expiration period has passed is a strong signal that cross mergers between oil and gas for larger economies of scale are going to be approved. If Exxon Mobil, the #1 by far on our 24/7 Wall St. Real-Time 500 by market cap, can get approval to buy a large gas producer then any other major domestic fully integrated or exploration & production player can too.

JON C. OGG

Filed under: Mergers and Buy Outs, Oil & Gas, Regulation Tagged: BHI, BJS, SII, SLB, XOM, XTO

A Flood Of Energy M&A: Schlumberger Buys Smith For $11 Billon

247wallst — Sun, 21 Feb 2010 18:43:02 +0000

The acquisition by Schlumberger Ltd. (SLB) of competitor Smith International Inc. (SII) for $11 billion could be another sign that mergers and acquisitions in the energy sector will pick up in 2010. This is the second big deal in the oilfield services sector, following last August’s announcement by Baker Hughes Inc. (BHI) that it would buy smaller rival BJ Services (BJS) for $5.5 billion.

Under the terms of the agreement, Smith shareholders will receive 0.6966 shares of Schlumberger in exchange for each Smith share. Based upon the closing stock prices for both companies on February 18, 2010, the agreement places a value of $45.84 per Smith share, representing a 37.5% premium. Upon closing, and reflecting the issuance of new Schlumberger shares, Smith stockholders collectively will own about 12.8% of Schlumberger’s outstanding shares of common stock.

Schlumberger expects to realize incremental pretax synergies—after integration costs—of aabout $160 million in 2011 and about $320 million in 2012. Schlumberger expects the combination to be accretive to earnings per share in 2012.

Exxon Mobil Corp.’s (XOM) proposed buyout of XTO Energy (XTO) for about $40 billion provides another example of M&A activity in the energy industry. Are there other deals lurking that will change the shape of the industry in the coming year?

Some rumors have surfaced that could prove out or could just be a waste of ink and pixels. What follows are some of the better possibilities.

Conoco Phillips (COP) might be the best bet among the big oil companies to forge a deal. Possible partners include Anadarko Petroleum (APC), Apache (APA), Devon Energy (DVN), and Marathon Oil (MRO). The three primarily exploration and production companies may be too rich for ConocoPhillips, but Marathon, with its large holdings of refineries, may be a decent fit with the fifth-largest refiner in the world.

Refining in the US is a nasty business right, with non-existent margins and low capacity utilization. US demand for refined fuels was dampened during the price run-up of 2008, and has never really come back. But if ConocoPhillips and Marathon could either spin-off or sell outright their combined refining operations, the more streamlined company could be a solid player in E&P going forward.

The most active areas for exploration and development in the US these days are the unconventional gas plays, particularly the shale deposits such as the Marcellus Shale in the Appalachians, the Bossier Shale in Texas and Louisiana, and the Eagle Ford Shale in south Texas.

Thanks to horizontal drilling techniques, shale gas flows quickly hit peak flows. Conventional gas wells ramp to peak flows much more slowly. St. Mary Land & Exploration (SM) drilled a vertical well in the Haynesville Shale play that produced an initial flow of 1.9 million cubic feet per day. Goodrich Petroleum (GDP) completed a horizontal well in the Haynesville that flowed at an initial rate of 12.2 million cubic feet per day. This kind of production is what makes shale gas plays so attractive.

One company that has made a substantial number of deals with its natural gas deposits is Chesapeake Energy (CHK). The company has raised about $11 billion in the past couple of years either through sales or partner agreements. One good possibility for another Chesapeake partnership is St. Mary, which holds leases and options on 225,000 net acres in Eagle Ford and a joint venture with Anadarko that includes another 66,000 acres.

Another possibility for Chesapeake is Pioneer Natural Resources Inc. (PXD), which recently announced that it is seeking bids for a partner to develop its holdings in the Eagle Ford play. Chesapeake has ceded first rights to a partnership in Eagle Ford to France’s Total SA (TOT) as part of an earlier partnership agreement. Pioneer holds 310,000 gross acres in the Eagle Ford play. The company holds proved reserves of 899 million barrels of oil equivalent, 98% of which is in the US.

Colorado-based Delta Petroleum (DPTR) has had its ups and downs in the past year, and has already announced that it is seeking “strategic alternatives”, including selling the company. The company’s market cap is around $400 million and it holds long-term debt as of September 30, 2009, of about $567 million. Cash flow from operations was negative in the third quarter of 2009, and the company had just $5 million in cash. Though not a shale play, Delta holds leases in Colorado’s gas-rich Piceance Basin.

Goodrich Petroleum with a market cap near $800 million and substantial acreage in the Haynesville and Eagle Ford plays also presents an opportunity for acquisition. The company’s proved reserves at the end of 2009 totaled about 421 billion cubic feet equivalent, 99% of which is natural gas.

A larger company that gets some attention in M&A chatter is Petrohawk Energy Corp. (HK). This is a larger deal, though, because Petrohawk has a market cap near $7 billion. The company is all over the Haynesville Shale and holds leases on some 225,000 acres in Eagle Ford.

Finally, Range Resources Corp. (RRC), with a market cap of about $8.5 billion, is heavily invested in the Marcellus and Barnett shale plays. But with a forward P/E ratio of over 60, the company may just be too rich for a potential buyer. But it’s not impossible to envision a joint venture or two with a company like Devon, which expects to recover 11 billion cubic feet equivalent per well in the core of the Cana Woodford shale play in Oklahoma.

The action in the energy business these days is virtually all in the natural gas shale plays. Exxon’s acquisition of XTO started the charge, and further consolidation is almost certain.

Paul Ausick

Filed under: Mergers and Buy Outs, Oil & Gas Tagged: APC, BHI, BJS, CHK, COP, DPTR, DVN, GDP, HK, MRO, PXD, RRC, SII, SLB, SM, TOT, XOM, XTO

Top Day Trader Alerts (AIG, BJS, BHI, GENZ, FNM, FRE, HGSI, MVL, DIS)

247wallst — Mon, 31 Aug 2009 13:09:47 +0000

These are Monday’s top day trader and active trader alert stocks. We have links through to each with more detailed price/volume analysis over at VSinvestor.com:

American International Group (NYSE: AIG) is giving back some of last week’s gains after Barron’s gave a harsh reminder here.

BJ Services Company (NYSE: BJS) is surging on a deal where Baker Hughes Inc. (NYSE: BHI) is acquiring the company….

Genzyme Corporation (NASDAQ: GENZ) is down over 3% on a downgrade and ahead of an FDA review date tomorrow.

Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) are both getting their wings clipped after FBR reminds of no underlying value remaining….

Human Genome Sciences, Inc. (NASDAQ: HGSI) is getting clipped as buyout hopes fade.

Marvel Entertainment, Inc. (NYSE: MVL) is surging after being acquired in a serious surprise merger by Walt Disney Co. (NYSE: DIS).

If you wish to be notified by email when the top day trader alerts hit, along with news of IPO’s, key offerings, guru investor data on Buffett and others, mergers, and more, you can join our open email distribution list which goes out several times per week.

JON C. OGG

Posted in Pre-Market Activity, Trading Alert Tagged: AIG, BHI, BJS, DIS, FNM, FRE, GENZ, HGSI, MVL

Top Analyst Upgrades and Downgrades (AGN, BJS, CTRN, ELN, ENDP, MVL, BTU, TXN, TXRH, TSN)

247wallst — Mon, 20 Jul 2009 11:25:41 +0000

These are the top 10 analyst upgrades and downgrades we have seen from Wall Street firms early this Monday morning:

Allergan (AGN) Raised to Buy at Citigroup.
BJ Services (BJS) Cut to Underperform at Wells Fargo.
Citi Trends (CTRN) Cut to Neutral at JPMorgan.
Elan (ELN) Raised to Buy at UBS.
Endo Pharmaceuticals (ENDP) Started as Buy at Citigroup.
Marvel Entertainment (MVL) Cut to Neutral at Janney
Peabody Energy (BTU) Raised to Outperform at FBR.
Texas Instruments (TXN) Raised to Hold from Underperform at Jefferies; Reiterated Sell w/ $14 target at Auriga.
Texas Roadhouse (TXRH) Cut to Neutral at Baird.
Tyson Foods (TSN) Cut to Hold at Deutsche Bank.

Jon C. Ogg
July 20, 2009

Posted in Analyst Calls Tagged: AGN, BJS, BTU, CTRN, ELN, ENDP, MVL, TSN, TXN, TXRH

Top Analyst Downgrades (AYE, AU, BJS, CEO, SLB, WX)

247wallst — Mon, 18 May 2009 11:49:53 +0000

These are some of the general analyst downgrades we have seen this Monday morning from Wall Street:

Allegheny Energy (AYE) Cut to Neutral at Goldman Sachs.
Anglogold (AU) Cut to Neutral at UBS.
BJ Services (BJS) Cut to Hold at Jefferies.
CNOOC (CEO) Cut to Neutral at Credit Suisse.
Schlumberger (SLB) Cut to Hold at Jefferies.
WuXi PharmaTech (WX) Cut to Underperform at Jefferies.

JON C. OGG

Posted in Analyst Calls Tagged: AU, AYE, BJS, CEO, SLB, WX

Williams, Other Services Companies in Venezuela’s Sights (WMB, HAL, SLB, BJS, BHI)

247wallst — Fri, 08 May 2009 14:55:40 +0000

The Venezuelan government passed a law permitting the nationalization of oil field services companies, compensating companies for expropriating assets by issuing bonds instead of paying with cash. The law could even lead to the annulment of existing contracts. Williams Companies (NYSE:WMB) appears to be the first target, and Halliburton Company (NYSE:HAL), Schlumberger Ltd. (NYSE:SLB), BJ Services Company (NYSE:BJS), and Baker Hughes Inc. (NYSE:BHI) could all be on the list.

Williams will write down $241 million in unpaid fees from Venezuela’s state oil company Petroleos de Venezuela SA (PDVSA). Other companies that might be affected, according to Upstreamonline.com, are Halliburton, Schlumberger Ltd., BJ Services, and Baker Hughes.

The situation in Venezuela can only get worse as production falls and PDVSA’s debts mount. US companies doing work in Venezuela are probably living in a fool’s paradise if they expect either to be paid for their work or to be able to hold on to their investments.

At least oil company stocks are up with higher oil prices today.

Paul Ausick
May 8, 2009

Posted in Emerging Markets, Oil & Gas, Politics Tagged: BHI, BJS, HAL, SLB, WMB

Top Analyst Downgrades (ARLP, BJS, CHKP, EP, FST, INFY, ISRG, STAR)

247wallst — Tue, 28 Apr 2009 11:44:37 +0000

These are some of the top pre-market analyst downgrades and negative research calls from Wall Street we have seen early this Tuesday morning:

Alliance Resource (ARLP) Cut to Market Perform at Wachovia.
BJ Services (BJS) Cut to Underweight at JPMorgan.
Checkpoint Software (CHKP) Cut to Hold at Deutsche Bank.
El Paso (EP) Cut to Market Perform at Wachovia.
Forest Oil (FST) Cut to Hold at Jefferies.
Infosys Tech (INFY) Cut to Hold at Societe Generale.
Intuitive Surgical (ISRG) Cut to Market Perfoirm at JMP Securities.
Starent Networks (STAR) Cut to Hold at Cantor Fitzgerald.

JON C. OGG

Posted in Analyst Calls Tagged: ARLP, BJS, CHKP, EP, FST, INFY, ISRG, STAR

Top Analyst Downgrades (BJS, BUCY, BNI, INTU, JOYG,PBR, TKC, WFMI)

247wallst — Mon, 27 Apr 2009 11:47:32 +0000

These are some of the top pre-market analyst downgrades we have seen early this Monday morning from Wall Street:

BJ Services (BJS) Cut to Market Perform at Wachovia.
Bucyrus (BUCY) Cut to Neutral at Baird.
Burlington Northern Santa Fe (BNI) Cut to Sell at Citigroup.
Intuit (INTU) Cut to Hold at Jefferies.
Joy Global (JOYG) Cut to Neutral at Baird.
Petroleo Brasileiro (PBR) Cut to Neutral at HSBC.
Turkcell (TKC) Cut to Neutral at UBS.
Whole Foods (WFMI) Cut to Sell at UBS.

JON C. OGG

Posted in Analyst Calls Tagged: BJS, BNI, BUCY, INTU, JOYG, PBR, TKC, WFMI

Precision Drilling Wins With Grey Wolf Addition (PDS, BJS, HAL, WFT)

247wallst — Wed, 22 Apr 2009 13:54:12 +0000

Precision Drilling Trust (NYSE:PDS) reported net first quarter 2009 earnings per common unit of about $0.26, off 62% from the same period a year ago. Revenues grew almost 31%, from $277 million to $362 million. (Amounts converted from Canadian dollars at US$1=CDN$1.23832.) Analysts had been expecting earnings per unit of $0.36.

The revenue growth resulted from Precision’s acquisition of driller Grey Wolf, which was completed in December 2008. That acquisition was credited with softening the blow of “the worst winter drilling season in Canada for the past 17 years.”

Earlier this week, BJ Services Co. (NYSE:BJS) reported very weak results, following so-so reports from both Halliburton Co. (NYSE:HAL) and Weatherford International Ltd. (NYSE:WFT). And also earlier this week, Precision announced a new financing deal to reduce the interest on its borrowing to purchase Grey Wolf. That deal caused the company’s unit price to drop 11% when it was announced on Monday.

Precision common units closed at $4.19 yesterday and shares are up 1% so far at $4.23. The company’s 52-week range is $2.00-$28.59.

Paul Ausick
April 22, 2009

Posted in Earnings, Oil & Gas Tagged: BJS, HAL, PDS, WFT

Another Oilfield Services Firm Falters (BJS, HAL, WFT, SLB)

247wallst — Tue, 21 Apr 2009 13:48:17 +0000

This is turning into a lousy week for oilfield services company. Today’s really downbeat earnings report from BJ Services Co. (NYSE:BJS) follows on yesterday’s weak reports from Halliburton Co. (NYSE:HAL) and Weatherford International Ltd. (NYSE:WFT).

BJ reported its second quarter 2009 EPS of $0.15, down 71% sequentially and 65% year-over-year. Revenue for the quarter came was $1.05 billion, down 26% sequentially and 18% from a year ago. Analysts weren’t expecting much, but they were expecting better results than that. Average estimates were slated at EPS of $0.22 and revenues of $1.13 billion.

Perhaps even worse for BJ, operating income fell by nearly three-quarters sequentially, from $220.4 million to just $58 million. As a percentage of revenue, operating income totaled just 5.5% in the second quarter, compared with 15.4% in the company’s first quarter and 14.5% a year ago.

The company blamed a “precipitous decline in drilling activity” for the miserable earnings. According to BJ, North American drilling dropped 28% from the previous quarter and 27% year-over-year, and rig counts are at a six-year low. This climate forced companies to compete harder and reduce prices for services and products.

BJ noted that it is taking all the usual steps to fight the economic downturn. It has laid off about 11% of its global workforce, reduced capital and discretionary spending, and looking for new ways to reduce costs.

Then comes the really poor news. BJ expects “drilling activity in the United States will decline further over the next several quarters, and will not meaningfully improve until natural gas supply is in better balance with demand, which may occur some time next year.”

In pre-market trading this morning, BJ shares are down nearly 11%, to $10.70. The stock’s 52-week range is $8.34-$34.94. Schlumberger Ltd. (NYSE:SLB), the largest of the oilfield services companies, reports earnings Friday. Its shares are also down about 2% this morning.

Paul Ausick
April 21, 2009

Posted in Earnings, Oil & Gas Tagged: BJS, HAL, SLB, WFT