These ETFs Should Enjoy An Anadarko Takeover
On Monday, Benzinga reported that Chinese energy giant China Petroleum & Chemical Corp. (NYSE: SNP), frequently referred to as Sinopec, is considering a takeover of Anadarko Petroleum Corp. (NYSE: APC). Texas-based Anadarko is one of the largest independent U.S. producers of oil and natural gas.
Anadarko has a long history as a potential takeover target. In 2012, Anadarko was rumored to be a possible target for both Exxon Mobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX), the two largest U.S. oil companies. Obviously, such a deal never came to fruition.
Still, if news of Anadarko as a takeover target persists and gains momentum, some exchange traded funds could benefit. And in what has been a dismal year for equity-based ETFs, these funds could use the help. With a market value of just under $24 billion, Anadarko is small compared to Exxon, Chevron and some of the other oil giants that dominate popular energy Etfs. However, there are a few funds where Anadarko has notable footprints.
The Market Vectors Unconventional Oil & Gas ETF (NYSE: FRAK) has one of the largest Anadarko weights among all ETFs with a 7.2 percent allocation to the stock as of Dec. 21. That makes Anadarko FRAK's third-largest holding.
Rumors of an Anadarko represent the second time since early November one of FRAK's holdings has been the focus of takeover chatter. Last month, Apache Corp. (NYSE: APA), FRAK's fourth-largest holding at a weight of 6.3 percent, was reportedly a takeover target.
FRAK has tumbled 43 percent this year. The $348.7 million iShares U.S. Oil & Gas Exploration & Production ETF (NYSE: IEO) is another ETF that could get a lift from an acquisition of Anadarko. That ETF allocates nearly 5.2 percent of its weight to Anadarko, making the stock the ETF's sixth-largest holding.
As is the case with FRAK, IEO was also stirred by the Apache rumor because that stock is also a top 10 holding in the ETF. IEO's largest allocation is an 11.5 percent weight to ConocoPhillips (NYSE: COP). IEO is off more than 27 percent this year.
The $155.2 million First Trust ISE-Revere Natural Gas Index Fund (NYSE: FCG) has a 3.4 percent weight to Anadarko, which does not sound like much until noting none of FCG's 31 holdings command a weight north of 5.1 percent.
FCG has been a dreadful performer this year, losing 63 percent, which is more than 1,300 basis points worse than the loss incurred by the United States Natural Gas Fund (NYSE: UNG), a futures-based product. On Monday, FCG closed barely above $4.
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