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Cowen Analyst Offers Potential M&A Laundry List In Oil Patch

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Noble Energy, Inc. (NYSE: NBL)'s $2.1 billion deal to merge with Rosetta Resources Inc. (NASDAQ: ROSE) could set a pattern for a raft of potential mergers, an analyst said.

Larger companies lacking operations in relatively virgin oil and gas-bearing basins "will use the downturn to acquire lower tier assets in those basins," Cowen's Charles Robertson said.

Potential takeout candidates that could match the pattern include Carnegie Wave Energy Ltd. (ASX: CWE), Callon Petroleum Co. (NYSE: CPE) and Laredo Petroleum Inc. (NYSE: LPI), according to Robertson.

Rosetta shares are up nearly 23 percent since May 11 when Noble Energy unveiled its acquisition plan.

Rosetta needed capital because of low commodity prices, but its relatively weak recent stock performance made the prospect of a stock offering "too dilutive," according to Robertson.

The deal gives the larger Nobel access to a relatively undeveloped basin outside its core operation,

Smaller, relatively cheap companies like Rosetta "present an inexpensive way to enter emerging basins," according to Robertson.

Similar deals may soon surface for companies whose shares have performed poorly after raising additional capital from stock offerings, Robertson said.

Early development stage assets Roberson focused on include the Permian Basin in West Texas and southeastern the New Mexico; the South Central Oklahoma Oil Province, or SCOOP, and the Utica Basin centered in Ohio.

Also holding attractiveness to potential buyers: Bonanza Creek Energy Inc (NYSE: BCEI).

Bonanza "doesn't offer exposure to emerging basins," Robertson said. But its debt level and poor recent stock performance make a secondary offering problematic.

Latest Ratings for NBL

DateFirmActionFromTo
Oct 2020Wells FargoMaintainsEqual-Weight
Aug 2020CitigroupDowngradesBuyNeutral
Aug 2020Morgan StanleyDowngradesOverweightEqual-Weight

View More Analyst Ratings for NBL
View the Latest Analyst Ratings

 

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