GeoResources Surges 20% on Buyout, Timing Comes as a Surprise

Shares of GeoResources

are seeing much strength during Wednesday's trading session after Halcón Resources

announced it has entered into a definitive merger agreement in which GeoResources will merge into a wholly-owned subsidiary of Halcón Resources in a cash and stock transaction that values GeoResources at approximately $1.0 billion. GeoResources is an independent oil and gas company engaged in the acquisition and development of oil and gas reserves through an active and diversified program which includes purchases of reserves, re-engineering, development and exploration activities primarily focused in the Southwest United States. Halcon Resources is also an independent oil and natural gas company engaged in the acquisition, development, exploitation, exploration and production of oil and natural gas properties, primarily in Texas, Louisiana and Oklahoma. Under the terms of the merger agreement, Halcón Resources will acquire all outstanding shares of GeoResources common stock. GeoResources stockholders will receive $20.00 per share in cash and 1.932 shares of Halcón Resources common stock for each share of GeoResources common stock, representing consideration to GeoResources stockholders of $37.97 per share based on the closing price of Halcón Resources common stock on April 24, 2012. The transaction will effectively increase Halcón Resources estimated proved reserves by over 150% to approximately 52.8 million barrels of oil equivalent, 69% of which is liquids, and substantially increase the company's average net daily production by over 170% to approximately 11,070 barrels of oil equivalent based on fourth quarter 2011 production rates. Commenting on the merger, Sterne Agee energy analyst Tim Rezvan stated that the deal between the two companies does not come as a surprise, however, Rezvan expected the deal to come in 2013 or 2014. Rezvan went on to point out that GeoResources's CEO Frank Lodzinksi and one of GeoResources's independent directors Michael Vlasic (GeoResources's largest shareholder), have invested together in oil and gas assets for more than twenty years and control more than 15% of the stock. So an exit strategy seemed inevitable. Currently, shares of GeoResources are trading up about 17% at $36.12 per share, and is up about 23% year-to-date. Halcón Resources is also trading higher on the session, up about 7.53% at $10.00 per share.