BHP offers 65% premium for Petrohawk--take the money and find another energy acquisition play

07/15/2011 3:36 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

Big news on Petrohawk (HK) since I posted http://jubakpicks.com/2011/07/15/let-the-ma-boom-show-you-where-to-put-your-money-in-this-crazy-market/ on how to use the mergers and acquisitions boom to develop an investing strategy for this crazy market.

After Thursday’s close BHP Billiton (BHP) announced a $12.1 billion cash bid for Petrohawk. The price is about 65% higher than the closing share price for Petrohawk on Thursday at $23.49.

BHP, which earlier this year, paid $4.8 billion to acquire shale oil and gas assets from Chesapeake Energy (CHK), is clearly still in the hunt for more shale acreage. Petrohawk owns about 1 million net acres of shale in the Eagle Ford, Haynesville, and Permian basins of Texas and Louisiana. (Eagle Ford is one of my two favorite shale plays—the other is the Bakken formation in North Dakota and Montana.)

If you own shares of Petrohawk, I’d sell today. At a recent price of $38.20 a share, the stock has captured almost all of BHP Billiton’s $38.75 a share offer.

Where might you put that cash to work?

If you’d like to take that cash and roll it over into another potential energy acquisition, in Eagle Ford I’d suggest taking a look at Pioneer Natural Resources (PXD). You should also consider some of the oil plays in Columbia that trade on the Toronto market such as Petrominerales (PMG.CN) or Pacific Rubiales (PRE.CN.) I’ve repeatedly recommended Bakken shale players Brigham Exploration (BEXP) and Oasis Petroleum (OAS). Many of these stocks are up today on the Petrohawk news—Brigham, for example, is up 6.7% as of 2:30 New York time. I hope you already own some of these names. If not, this market is so volatile that you’re likely to get another dip not too far down the road.

Full disclosure: I do not own shares of any stock mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/ , may or may not now own positions in any stock mentioned in this post. The fund did own shares of Brigham Exploration and Oasis Petroleum as of the end of March. For a full list of the stocks in the fund as of the end of March see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/ (I will post the fund’s holdings updated through the end of June next week.)

 

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