Has Freeport Set Off a New Wave of Energy M&A?

The big news out of the energy patch today is that Freeport-McMoRan

, the largest U.S. copper miner, is getting back into the energy business in a big way. Shares of Freeport down almost 14 percent following news the company will pay a combined $9 billion to acquire McMoRan Exploration

and Plains Exploration & Production

. Arguably, the biggest surprise in this news is the desire of a copper and gold miner such as Freeport-McMoRan to become heavily involved in the oil and gas business. However, at least when it comes to the deal for McMoRan Exploration, the news is not all that stunning. The exploration and production company is an old spin-off of the mining firm. Additionally, McMoRan's CEO Jim Bob Moffett is Freeport's chairman and the two firms

. Beyond that, McMoRan

. The recent plunge in the company's shares on news that its Davy Jones well in the Gulf of Mexico is not as lucrative as previously thought sent the stock well into small-cap territory, making it cheaper for Freeport to make a move. Predictably, Wall Street wants to know what energy names could be future takeover targets. With some of the largest oil and gas companies holding massive amounts of cash while dealing with declining output, questions and rumors about increased energy sector mergers and acquisitions activity are to be expected. The following names could prove to be valid takeover targets in the months ahead:

Energy XXI is McMoRan's partner on some deepwater projects and as such, shares of the former are up 7.4 percent today on double the average daily volume. The bad news is Energy XXI has a working interest in Davy Jones. With McMoRan's problems there, potential suitors for Energy XXI could be kept at bay. On the other hand, there is some good news for Energy XXI shareholders that are itching for a takeover. The company's previously announced 2013 capital spending plans show the firm is eschewing gas projects in favor of increasing oil production. More importantly, Energy XXI

with Exxon Mobil

. Guess who has plenty of cash, can easily afford to acquire a company with a $2.67 billion market value and needs to increase oil output? Exxon Mobil.

With a market capitalization of just under $785 million, the Exxons of the world could swallow Comstock whole and not even feel anything. However, acquisitions are not always about price. Comstock comes with some baggage, not the least of which is margin erosion and the fact that the company was not profitable in the third quarter. Comstock's debt-to-capitalization at the end of the quarter was over 55 percent, meaning any potential suitor would have to digest over $1.2 billion in debt. Additionally, the company is a gassier play with 1.3 trillion cubic feet of gas reserves at the end of last year. If Comstock is a credible takeover target, it would likely be way of a foreign company that is looking to bolster its U.S. shale footprint.

For the oil major looking to make a splash, Devon Energy is an interesting. With a market cap of $21 billion, the list of legitimate suitors is confined to Exxon, Chevron

and the European equivalents, excluding BP

. Even as natural gas prices have perked up a bit, Devon's shares have plunged to around $53 today from nearly $76 in April. Third-quarter revenue plunged 88 percent and the company took a loss in the quarter because of an impairment charge on the value of its oil and gas properties. One glimmer of hope exists in the form of

. Another source of allure for a potential buyer is that Devon operates exclusively in the North American onshore market. That significantly lowers the risks and costs associated with offshore operations. It also means Devon has to worry about Nigerian rebels, corrupt Russian politicians and over-zealous Latin American courts as other large energy firms do.