Ann: Atzam 4 - Drilling Update , page-2

Oil is certainly a good market to be in it seems! No matter how big you are. Lets see if we can get a few wells up and going earning a few hundred thousand dollars a day!

http://www.marketwatch.com/story/more-oil-company-takeovers-coming-2012-07-24?dist=tbeforebell

July 24, 2012, 10:12 a.m. EDT

More oil company takeovers coming


By Kirk Spano

I returned from another trip to North Dakota Sunday on a visit that was equally split between looking at the oil story there and fishing the amazing Devil's Lake area. Originally I had planned to use an analogy about how fishing with champion angler and guide Pete Harsh was like finding good stocks, something along the lines of you hook, then look at a lot of fish, but only keep a few.

I think I could have made the fishing analogy work, but I woke up Monday morning to see that Cnooc had put in a big bid for Nexen at a 61% premium and decided that was too big not to talk about.


GAMES
First week results are in
Chipotle got a nasty case of earnings heartburn but top players shorting the stock saw huge gains. Join the competition now!/conga/story/misc/fet_td.html 217567 The purchase attempt demonstrates not only how important oil is, but that despite a minor oil inventory buildup due to a slow economy and some new drilling, oil is a scare resource that will only become more scarce in coming decades. Cnooc /quotes/zigman/274848/quotes/nls/ceo CEO -1.02% used recent price weakness in oil stocks to scoop up reserves on the cheap.

The Nexen /quotes/zigman/22952/quotes/nls/nxy NXY +0.39% purchase is still the tip of the iceberg of course. More takeovers are coming, in a big way.

Right now, Exxon /quotes/zigman/203975/quotes/nls/xom XOM -0.74% , Chevron /quotes/zigman/289939/quotes/nls/cvx CVX -1.53% and Conoco /quotes/zigman/294662/quotes/nls/cop COP -0.74% are sitting on a combined cash of $30 billion and annual free cash flow of $30 billion. They not only have the money to scoop up companies sitting on desirable reserves, they have the money to buy big companies.

Several years ago Conoco bought Burlington. More recently we saw Statoil /quotes/zigman/285454/quotes/nls/sto STO -2.35% buy Brigham. There have been dozens of other acquisitions as well.

With oil company stocks appearing to be making an intermediate-term double-bottom, despite tensions in the middle east, right now is an opportunity to add oil companies to your portfolio if you have not already done so.

If you have followed me, you know I have been selling puts on many of the smaller Bakken companies. Identifying potential takeover targets is not restricted to smaller companies however.

Two potential Bakken takeover targets include large acreage holder Continental Resources /quotes/zigman/465953/quotes/nls/clr CLR -3.42% and midsize Whiting Petroleum /quotes/zigman/329401/quotes/nls/wll WLL -2.70% .

Continental , led by Harold Hamm, is currently pouring revenue into drilling more wells. When the number of drilled wells exceeds the number of wells being drilled by a large enough number in a few years Continental will begin throwing off a huge amount of free cash flow.

At a market cap of about $13 billion however, Continental is easy enough to digest that an aggressive large suitor is likely to emerge. Whether they can meet Hamm's price will be the question. If the company is not acquired, it will become a dividend play. That is a nice margin of safety to have.

Whiting is a highly efficient company trading at a market cap of about $5 billion and is off of it's 52-week high by nearly a third. The company's acreage in the Bakken is significant and highly desirable. They are the second largest producer in North Dakota after Continental.

After acquiring Montana acreage in order to exploit the Bakken and Three Forks formations there, it is on it's way to becoming a major producer in Montana as well. The company is diversified with various plays throughout North America making it highly desirable to a major.

I have been encouraging people to look into oil companies all year now. I understand the short-term nature of some traders and the fear of investors in general, however, by the end of the decade, if you do not add oil company exposure soon, you will look back and wish you had. Hook a few of these fish now and keep them.