petrohawk leads shale surge on bhp buyout offe

tickerspy.com Staff, On Friday July 15, 2011, 9:54 am
Shares of Petrohawk Energy (NYSE:HK - News), the Texas-based independent oil and natural gas producer, are surging 62% today after the company received a $12.1 billion buyout offer from BHP Billiton (NYSE:BHP - News), the world's largest mining company, after the close of U.S. markets on Thursday. BHP's offer, which values Petrohawk at $38.35 a share, or a 65% premium to where the shares closed on Thursday, has sparked a rally in the Shale Gas Stocks Index, which is up 7%.

If completed, the deal would be BHP's largest foray in the U.S. shale gas business and its second this year. Earlier this year, the Anglo-Australian mining giant paid $4.75 billion to acquire shale assets in Arkansas from Chesapeake Energy (NYSE:CHK - News), the second-largest U.S. natural gas producer. Petrohawk's board has unanimously approved the offer.

The move to buy Petrohawk is in direct contrast to comments made by BHP CEO Marius Kloppers earlier this year when he said that his company would pass on larger acquisitions in favor of spending its massive cash hoard on developing its own mines and oil and gas fields.

That said, the deal to acquire Petrohawk could serve as some consolation for Kloppers and BHP shareholders that have seen the company fail in its efforts to acquire rival Rio Tinto (NYSE:RIO - News) and Potash Corp of Saskatchew (NYSE:POT - News), the world's largest fertilizer producer, over the past several years.

Since last year's failed hostile bid for Potash, BHP has been rumored to be interested in acquiring an oil and gas company and was linked to Anadarko Petroleum (NYSE:APC - News), among others, though no deal for Anadarko ever materialized.

Petrohawk will provide BHP with access to 1 million net acres across Texas and Louisiana, in the Eagle Ford and Haynesville shales, and the Permian Basin, with net production estimated this year at 950 million cubic feet equivalent per day or 158,000 oil-equivalent barrels per day, Barron's reported.

The move by BHP has caused Ticonderoga Research to reevaluate the valuations it has for Chesapeake. In a note, Ticonderoga sees Chesapeake being similar to Petrohawk and for that reason believes Chesapeake is undervalued based on this transaction. Ticonderoga writes that of all the companies in the space, including Anadarko Petroleum, Devon Energy (NYSE:DVN - News), and EOG Resources (NYSE:EOG - News), Chesapeake is the most undervalued. The firm sees a net asset value for Chesapeake at $58 per share.

Looking at other Index constituents, Consol Energy (NYSE:CNX - News) is up 2% while Devon Energy is higher by 2%. Range Resources (NYSE:RRC - News) and Southwestern Energy (NYSE:SWN - News) are up 6% and 4%, respectively.

http://finance.yahoo.com/news/Petrohawk-Leads-Shale-Surge-indie-4074971538.html?x=0&.v=1