Seeking Alpha: Occidental Has A Good Plan, And Some Value Left

Despite relatively good returns on capital and a solid asset base, Occidental Petroleum (NYSE:OXY) hasn't really been at the top of the Street's list of favorites in the oil and gas sector. Now, management is pushing on with an ambitious restructuring plan that will see its once-core California business spun out on its own, a likely sell-down of its assets in the Middle East and North Africa, and a more aggressive drilling program in the Permian. All told, Occidental should be looking at better production growth and stronger returns than most large peers, with an enhanced oil recovery program supporting a decent dividend. A combination valuation methodology supports a fair value above $110, which I think is a decent implied return.

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Occidental Has A Good Plan, And Some Value Left

Investopedia: Petrohawk Flies Into The Sunset

It cannot really be said that the announcement of the acquisition of Petrohawk (NYSE:HK) Thursday night was a big surprise. Not only was this an attractive "mid-major" with productive and highly concentrated assets, but most analysts of note thought it was trading well below the fair value of its assets. Apparently BHP Billiton (NYSE:BHP) agreed, and had no problem opening its wallet and paying a premium for this natural gas-focused exploration and production company. (To learn more about mergers, check out The Merger - What To Do When Companies Converge.)

The Terms of the Deal  
BHP Billiton proposes to acquire Petrohawk for $38.75 per share in cash, a price that creates a total deal value of approximately $15 billion (including debt) and a 65% premium on the shares. Assuming that the deal goes through, and the $400 million break-up is high but not necessarily prohibitive, BHP will be paying something north of seven times the forward EBITDA for Petrohawk - more or less near the "standard" forward multiple for a company like this (albeit a premium to the current group average in the "5s").

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http://stocks.investopedia.com/stock-analysis/2011/Petrohawk-Flies-Into-The-Sunset-BHP-HK-BHI-ROSE-EOG-RRC-BEXP0719.aspx

Can Sasol Liven Up North American Gas?

For years now, natural gas bulls have sputtered and fumed over the expanding gap between the price of oil and natural gas. From an energy-content point of view, natural gas is extremely cheap and oil is relatively quite expensive. Typically those gaps do not persist, but there is a problem in this case - natural gas just is not as useful; it does not go into car gas tanks, it does not make diesel or jet fuel, nor any of the other follow-on products that come out of a barrel of oil. 

If Sasol (NYSE:SSL) has its way, though, the road to change may be in sight. 

A Tie-Up with Talisman   

Sasol, the large South African synfuel specialist, announced an agreement on Monday whereby it was acquiring a 50% operating interest in one of Talisman's (NYSE:TLM) shale gas assets. Sasol is paying a bit more than $1 billion for 50% of the Farrell Creek development in the Montney Shale. The way the deal is structured is a little unusual, though. Sasol will pay $263 million in cash upfront, and then fund three-quarters of Talisman's development costs up to the announced purchase price.

 
The Asset 
Montney is a bit like Canada's Barnett, Haynesville or Marcellus - a geological formation that contains huge amounts of hydrocarbon resources (natural gas, mostly), but requires advanced exploitation technologies to access. According to reports, this development may contain upwards of 9.6 trillion cubic feet of natural gas - clearly a sizable reserve base. An important part of the asset, though, is the fact that it is also relatively close to established pipeline infrastructure - given the problems that companies like Ultra Petroleum (NYSE:UPL) used to have in getting full value for its gas (due to a lack of infrastructure), that is not a trivial factor.
 

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http://stocks.investopedia.com/stock-analysis/2010/Can-Sasol-Liven-Up-North-American-Gas-SSL-TLM-CHK-UPL-SWN1222.aspx

Foreigners Agree: Eagle Ford Shale Is The Place To Be

The Eagle Ford Shale area in Texas is a hot area for energy development that just keeps getting hotter. As two more deals from Monday highlight, companies from around the world are willing to pay up to get a piece of this potentially significant oil and gas resource in south Texas. 

CNOOC and Chesapeake
China National Offshore Oil Corporation (NYSE:CEO), or CNOOC as it is more commonly known, is shelling out potentially as much as $2.2 billion for a one-third stake in Chesapeake Energy's (NYSE:CHK) Eagle Ford acreage. Chesapeake's holdings total about 600,000 acres and appear to be relatively oil-rich - not an insignificant detail considering the considerable price differences between natural gas and oil these days.

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http://stocks.investopedia.com/stock-analysis/2010/Foreigners-Agree-Eagle-Ford-Shale-The-Place-To-Be-CEO-CHK-STO-TLM-PXD-PXP-MHR1012.aspx