05
Apr

Merger Monday Morning

Print Friendly, PDF & Email

 

 

 

Market Sentiment Watch: Market continues to grind higher. In energy land we have a couple of drivers this morning: 1) SD acquiring ARD (see Stuff section for more details) which positively influence the small and mid cap domestic E&Ps this morning, especially reinforcing what has been the stronger trading of late in the oilier names and 2) word from the WSJ that not only is the EIA set to revise numbers as previously disclosed but that the agency has been Overstating gas supply and thereby suppressing natural gas prices.

 

The Week Ahead: Pretty Quiet on the data front

  • Monday 4/5: ISM non-manufacturing (F= 54%) and Pending Home Sales, both due out at 10 am EST today.
  • Tuesday 4/6: No data release scheduled
  • Wednesday 4/7:  EIA Oil Inventory Report, EOG Analyst Day, Consumer Credit for February (F= -$1.5B) 
  • Thursday 4/8: EIA Natural Storage Report, Jobless Claims (F=435K)
  • Friday 4/9: Wholesale inventories

In Today's Post:

  • Holdings Watch
  • Commodity  Watch
  • Stuff We Care About Today - SD / ARD, BEXP
  • Odds & Ends

Holdings Watch:

ZCAT (Zman Catalyst portfolio, formerly the $10KP II):

  • $10,100
  • 63% Cash
  • Positions are updated on the ZCAT, ZIM, ZLT.
  • Last Thursday’s Trades:

    • Sold the 50 April $17.50 calls bought Monday for $0.20 today for $0.30. I continue to hold 10 calls and will add these back if the market takes a header into the close, looking for an operations update press release in the next week or two.

ZIM (Zman Inefficient Markets portfolio)

  • $9,600
  • 55% Cash
  • Last Thursday’s Trades:
    • Added (20) April $17.50 calls on two more big wells in the Bakken. Stock was already up on the day and I added these with the stock at $17.12 five minutes after the news hit. Yes these are the same calls I partially sold out of the ZCAT earlier in the day but new news inspires a new trade. One of the wells was their biggest Ross area IP to date.

Commodity  Watch:

Crude oil rose 6% last week to close at $84.87 on a slightly weaker dollar, a slightly strong equity market, and economic data that continues to point to recovery, however slow that may be. The 12 month crude strip is now trading at $86.39. This morning crude up 50 cents plus on a slightly weaker dollar and slightly strong equity futures.

  • Aaaarrrrr Watch: Somali pirates seize South Korean flagged VLCC with Valero crude shipment on board and bound for the Gulf Coast. Yet another element for the risk premium in oil prices, albeit probably a small one.

 

Natural gas bounced 4% last week to close at $4.09, the direct result of a tamer than expected injection into gas storage. The 12 month strip is now trading at $4.80 and looks like this. This morning gas is trading up slightly off which is to be expected as it retraces a 6% surge on Friday. I don't expect a retest of the recent lo in the near term but I expect prices to be soft during the rest of April. The following should be supportive with a rally into the number at month end.

  • Your Tax Dollars Shamefully Squandered Watch: EIA Has Been OVERSTATING Gas Supply. For months EIA has been talking about changes to the way it extrapolates collected gas supply data across the population of smaller companies that they don't collect monthly data for. As a Wall Street Journal article put it over the weekend:
    • "the Energy Information Administration, the statistical unit of the Energy Department, has uncovered a fundamental problem in the way it collects the data from producers across the country—it surveys only large producers and extrapolates its findings across the industry. That means it doesn't reflect swings in production from hundreds of smaller producers....some states will see "significant" revisions in production."
  • Read the WSJ article here. The data is due to be revised with the next Natural Gas Monthly at the end of April. Note that new data for January and February will use the new methodology but that 2009's data won't be revised until the fall. ZCommnets: Two thoughts: I am not at all surprised and 2) let the first wave of short covering begin.

 

Stuff We Care About Today

SD Takes ARD

  • $40 per share or $1.55 B, 16.8% above the Friday close. This values ARD at:
    • 9.8x 2010 Est. CFPS and 7.9x 2011 Est. CFPS
    • or $22.40 / BOE for their proved reserves which is fairly strong
    • These valuations are not unreasonable high given the oiliness of ARD (85% of production in the 4Q came from oil)
  • Congrats to West who gets a free quarter for his pick in the acquisition contest.
  • This acquisition should put oily names even more squarely in the spot light. Names that come immediately to mind amongst domestic E&Ps of size are:

 

BEXP Announced 2 More Big Wells Mid Day Thursday; Revises 1 IP Higher Today

  • On Friday, BEXP announced the Sorenson 29-32 #1H well and the Jack Erickson 6-31 #1H had an IPs of 3,511 BOEpd and 2,652 BOEpd respectively in a mid day press release.
  • Today, BEXP gave a revised IP (after drilling out the frac plugs) for the Sorenson well of 5,133 BOEpd (4,335 barrels and 4.79 MMcf) which would be a record high for the Bakken play so far.
  • The Sorenson is a Ross area Bakken well and the biggest one for them to date in terms of IP. If people start ascribing the big EURs of Rough Rider, over to the Ross area it should have a positive impact on analyst's thoughts on net asset value here.
  • BEXP's wells are exceeding expectations given for their guidance for 2010 and this Sorenson well, in which they have a 95% working interest, should help push some analyst CFPS estimates higher in addition to casting that positive light on their NAV.
  • BEXP should have 3 more Rough Rider completions that it may be able to press release within the next 2 weeks.
  • BEXP Long laterals to date:

Odds & Ends

Analyst Watch:

  • TSO - cut to Hold by Deutsche Bank
  • CCJ cut to Sell at Canaccord

 

172 Responses to “Merger Monday Morning”

  1. 1
    zman Says:

    SD’s conference call for the ARD acquisition is at 9 am EST.

  2. 2
    elijahwc Says:

    Also DNR – Denbury Resources announces that it has entered into an agreement with Quantum Resources Management to sell certain of its oil and natural gas properties recently acquired in the merger with Encore Acquisition Company for a sales price of $900 million. The properties to be sold are primarily located in the Permian Basin in West Texas and southeastern New Mexico; the Mid-continent area, which includes the Anadarko Basin in Oklahoma, Texas and Kansas; and the East Texas Basin. The sale properties do not include the Company’s Haynesville Shale, Paradox Basin, Cleveland Sand Play and Tuscaloosa Marine Shale properties. The sale is expected to close in May 2010.

  3. 3
    bill Says:

    more great news from bexp..secondary cant be far behind

    eia numbers..can you imagine if enron was in charge of issuing numbers and this happened..people would be going to jail, in the gov’t they dont get a box of donuts today

    thanks for the oily ep names, exactly what i wanted..exxi at only 4.2 times cash wow, wll wow alot of cheap names

  4. 4
    bill Says:

    im buying dnr at the opening

    they are moving post acquistion and selling non core assets

  5. 5
    zman Says:

    Bummer to lose a legend:

    http://www.marketwatch.com/story/boots-coots-pays-respect-to-edward-coots-matthews-2010-04-01?reflink=MW_news_stmp

  6. 6
    West Says:

    There might be a mistake and the contest is still on, as I was suppose to have DNR. I just recently renewed for a year which is a great value. Probably have a good shot with DNR for the contest as Cos continue to increase their oily exposure. There are a lot of smaller deals going on here in the Permian Basin which has a lot of Independents that can be consolidated. Also unless I missed it no one has chosen KOG which looks like a strong takeout candidate. Congrats to Tom and the others at SD for a remarkable set of acquistions which changed them from one of the most gases companies to a very balanced mixture with a lot of upside.

  7. 7
    zman Says:

    West = I had you down as DNR but had ARD next to that as I thought you asked in comments to change it.

  8. 8
    Nicky Says:

    Morning all. Triangles, ending diagonals, whatever, it all points to the 1084 – 1094 region on the SPX.

  9. 9
    zman Says:

    … and you are correct, no one has KOG.

  10. 10
    zman Says:

    Nicky, that’s a “0” and not a “1” in there? As in, a 100 point drop?

    Crude at $85.90, up a buck

    NG down 3 cents, they’re still reading the Journal article I guess and maybe getting hung up on the fact that we’ll only have 2 months of new numbers and not the full year for 2009 to look back on.

  11. 11
    bill Says:

    sd call on now

    800-599-9795

    id 44377324

  12. 12
    bill Says:

    sd down 34 cents in premarket

    ard up about 10 %

  13. 13
    zman Says:

    Arena presentation:

    http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9Mzc1MzU0fENoaWxkSUQ9MzczNzQxfFR5cGU9MQ==&t=1

  14. 14
    Nicky Says:

    Some analyst on CNBC earlier saying it would take $150 oil to effect the economy. I think he must be in la la land. Many more pointing to a move above $3 in gasoline as the pychological barrier that will impact retail and the restaurant biz bottom lines although I think we already have that number in parts of the country.

  15. 15
    Nicky Says:

    sorry z re # 8 – should have said 1184 – 1194. How quickly I can forget 100 points!

  16. 16
    Nicky Says:

    The drop if and when it comes (!) should see us back to the 1127 area.

  17. 17
    zman Says:

    Nicky – thanks, just wanted to make sure!

    SD conference call going well so far, makes a lot of sense for SD to have done this.

  18. 18
    andy Says:

    z – damn had the acquirer instead of the acquiree. can i switch to KOG as i dont think SD will be acquired now.

  19. 19
    West Says:

    Z, I had asked to change to XEC and you said ok but not wholesale change by everybody. So either way it would not be me.

  20. 20
    zman Says:

    Andy – yes.

    West – thanks for the honesty man. Have you as XEC now.

  21. 21
    zman Says:

    BEXP – fairly calm open, would like to see it take out the old $18 high today. I have feelers out on a potential secondary here.

  22. 22
    zman Says:

    Just an FYI, BOP is traveling today.

    Bill – the new combined SD/ARD is sounding like a very interesting company, will be wrapping arms around it today.

  23. 23
    dij Says:

    Bill,
    Are you waiting for a $40 number to sell ARD, or higher? Thanks

  24. 24
    zman Says:

    SD – no price collars on the deal. So if SD moves up, so does ARD.

  25. 25
    zman Says:

    KOG at 3.70
    NOG over 17
    WLL over 85, all on BEXP and probably SD/ARD.

    SSN at $0.51 probably a bit of the BEXP impact.

  26. 26
    zman Says:

    NG turned around now, traders must have needed another cup of joe and reread that WSJ article.

  27. 27
    bill Says:

    If i heard right, 50 m break up fee if ard shareholders vote no

    Im baffled why ard agreed to a deal with no collars and huge break up fees

  28. 28
    bill Says:

    ARD ceo just admitted company was not for sale so they didnt shop for a better bid.

    Ard either has huge operational issues or idiots for mgt or both

  29. 29
    zman Says:

    Bill – sounds like a good to me for SD. ARD, not so sure, analysts definitely scratching heads here.

  30. 30
    bill Says:

    >SD conference call going well so far, makes a lot of sense for SD to have done this.

    i agree, makes no sense for ard. i think the ceo violated fidiciary duties

  31. 31
    zman Says:

    ISM non-manufacturing comes in at 55.4% vs 54% forecast.

    Pending home sales up 8.2% for Feb.

  32. 32
    elijahwc Says:

    So one ought buy more ARD as a lever into SD.

  33. 33
    zman Says:

    Eli – as long as the deal doesn’t get voted down. They said they have been on talking since January, so pre drop. Interesting they (ARD) were looking for acquisitions on the oil side and they merge with SD which is gassy. I could see some big shareholders suing here. Seems odd, probably the reasoning by the sort of wide arb spread here.

  34. 34
    zman Says:

    WHX up through $20.

    SD working higher off it’s lows.

    AEZ only oily name on my screen not working higher today. 2nd Bakken well not that far away, should have results in 1 month.

    Will have new Catalyst List updates tomorrow.

  35. 35
    bill Says:

    I havent sold anything.

    Im hoping for sd to bounce back to 7.50 – 7.75 then i plan on trimming position

  36. 36
    elijahwc Says:

    #33 put another way, SD was willing to pay a resonable premium to $43 just a month or so ago.

  37. 37
    zman Says:

    SSN at $0.53, trying to work higher, should have a press release out in next 1 to 4 days.

  38. 38
    zman Says:

    Eli – Maybe, gotta figure SD knew all about the infrastructure issues before ARD released it.

  39. 39
    RMD Says:

    #28: price seems to be at high end which helps mgt decide to sell. $188,000 per bbl/d and $23/bbl (where 37% are proved) also pricy. Motivated buyer though it probably fits with FST purchase where SD paid $10/boe and $105,000/day (approx. 65% oil and NGL).

  40. 40
    cargocult Says:

    Is HAL on the move for a special reason today? Glad I added to my April calls.

  41. 41
    zman Says:

    Cargo – great question inspires the thought that it’s moving on the story regarding gas. I see no news and no broker updates. Numbers have been trickling lower so this could be views as a story that helps the likes of HAL, HP, NBR, along of course with the gassy E&Ps. Part of SWN’s decision not to hedge much (15%) this year has been not trusting the EIA’s production data and that stock is moving higher too.

  42. 42
    bill Says:

    I cant wait to see TPH fairness opinion. Previously, they dissed sd.

    Did ARD CEO violate his fiduciary duty not to shop this around

    Z , any comments

  43. 43
    Nicky Says:

    VIX is not confirming this move up in the market.

  44. 44
    zman Says:

    Bill – re fidu, maybe so. He said they were very satisfied, will see if the big shareholders were. As RMD points out, on a flowing barrels and proved reserved basis it’s a nicely priced deal. But shareholders often overlook that kind of metric.

  45. 45
    RMD Says:

    further to #39: SD’s corporate strategy, and reason to go public, were really flawed, so they are buying their way (diluting their way?) away from that strategy and paying up to do it, creating a new co. with debt 2X equity. I thought the industry learned in ’08 that that was too much debt! More offerings in the pipeline, I guess.

  46. 46
    zman Says:

    BEXP – contact at one sell side firm saying they think BEXP waits until year end or early next year to do a deal. I think that’s a bit longer but it jives with some of the language from early 2010 presentation. My sense is the deal is more price dependent (hence, > $20) than it is time dependent.

  47. 47
    bill Says:

    38

    I have 10 reports from different analysts and all value over 50 per share

    if you use cash flow as the metric its about 10 x

    i think sd got a steal. Lets see what ard shareholders say

    i predict lawsuit and no vote

  48. 48
    Popeye Says:

    Nice move for SSN, one more penny and I’m gone.

  49. 49
    bill Says:

    45, they arent incurring any debt for this deal and equity goes positive from a negative net worth

    the balance sheet looks better with the deal. sd debt holders must be giddy

  50. 50
    zman Says:

    Bill – the more I look at the slides the more I think what a great deal this is for SD, especially for 2011.

  51. 51
    zman Says:

    NG up 12 cents.

  52. 52
    bill Says:

    there were 6 calls in a row that question ard’s mgt on the stupid deal/process. Go listen to it

    When was the last time you saw an acquisition go for a mighty 3 dollar premium after the stock suffered a 12 point decline on non cash write offs and reserve adjustments.

    oil is soaring, the deal make no sense unless ard has huge problems

  53. 53
    bill Says:

    50 agreed

    and if ng rallies, ard mgt will look like genius’s and ward the idiot for using depressed shares for the acquisition

  54. 54
    Nicky Says:

    Oil is soaring apparently due to an improving economy. This crap drives me nuts. At what point does the ‘improving economy’ get pushed over the edge again by oil? And its nothing to do with the economy. Its a technical breakout and the speculators are back in charge of the asylum. Metals at the moment not confirming the move in energy. What is more interesting to me is that normally commodities are the last to join the party and to me this just confirms the impending top.

  55. 55
    zman Says:

    ZTRADE – ZCAT – MMR

    Added (20) April $16 calls for $0.59 with the stock at $15.80. We should be very near an operational update on two of their wells (Davy Jones and Blueberry Hill) although there’s no assurance they won’t stay mum until they report earnings, they generally don’t and the timing on the Blueberry Hill makes sense as it is well below it’s original planned depth now.

  56. 56
    Jerome Blank Says:

    For some reason all the stocks in the glossary after UNG got cut off of the notes section over the weekend and I don’t know why…when things slow down, I’ll contact stockcharts tech support…but all the charts and updates thru XTO are still posted…

  57. 57
    zman Says:

    BEXP – still dragging its feet. Pretty surprised by that. May add a little more back in the ZCAT.

  58. 58
    zman Says:

    Thanks JB, see anything interesting there? SWN still running, I guess adding a 4th X on this move, makes sense with regard to the EIA’s flub.

  59. 59
    isleworth Says:

    Z- what do you think this govt screw-up on nat gas reporting have on the industry moving forward?

  60. 60
    elijahwc Says:

    AEZ starting to get noticed

  61. 61
    zman Says:

    AEZ starting to move now, on BEXP news and higher oil. I’d wanted a pullback prior to their second well coming in May, may have gotten that already.

    Isle – depends on how big it is. We all know the numbers are close but they really botched the way they manufacture the data for those not in the survey. If the numbers are big and send gas prices jumping, a thing I don’t really anticipate but who knows, then you could see increased govt oversite in the space, more reporting requirements, a bigger allocation of EIA assets to monitoring more producers. I now know that the govt owes me for all that head scratching over the data in the past.

  62. 62
    zman Says:

    WLL – cheap name, breakout continues.

  63. 63
    Dman Says:

    Nicky, just wanna point out that crude is a global commodity. The real question is whether asia continues to grow its consumption and add huge numbers of cars to their roads. If they do (& it seems like they are) then crude will go thru the roof because these new drivers are not price-sensitive. They’ve never had cheap fuel, so they don’t know what they’re supposed to be upset about. I took a look at the Shanghai index today & I’d be interested in what you think.

    BTW I *do* think that when crude hits the roof it will crater the economy. But there’s a delay and it’s gotta move up for a while before the effect percolates.

    Also, remember that the real value of the USD is declining (check out gold & silver, AUD & CAD etc). So $85 crude today is not the same as $85 crude a year ago.

    Finally, while the world economy has been spending the last few years in the crapper, the oilfield declines have been very busy. So the supply-demand curve is shifting even while the economy is doing not much.

  64. 64
    Dman Says:

    Weekly chart on AEZ is a phenomenon. Almost a perfect parabola.

  65. 65
    Nicky Says:

    Dman imo China is a bubble about to implode. I posted something here last week about the Shanghai index – it has already given a death cross.
    That said I think we can see that many of these markets include our stockmarket are starting to look like a bubble. I don’t believe in the economic recovery at all. People at grass roots level say they are not seeing any improvement to a year ago. All we have achieved is a mind blowing deficit.

    That said when I can stop myself getting annoyed at the nonsense I see and look at the charts yes you are right and oil should go a lot higher.

  66. 66
    RMD Says:

    Simmons comment on SD – ARD: paid full price given avg. Permian pricing of $15/boe and $92,000/d but helps SD avoid “financial issues” in ’11 and ’12 if gas prices stay weak vs. SD’s small hedge position. Improved balance sheet, more oily, commodity diversification and flexibility, bigger mkt cap could attract larger investors.

  67. 67
    cargocult Says:

    Anyone have thoughts on US$ vs EURO in the next few months? Planning a trip.

  68. 68
    zman Says:

    EOG not giving me any pullback either, analyst day Wednesday, looking at the $105s.

  69. 69
    zman Says:

    Oily royalty trusts popping nicely on this breakout for oil (now up $1.80 at $86.66). PBT, WHX moving nicely.

    Depressed gas names, or the highly shorted gas names should start recovering pretty quickly I’d think as gas starts to anticipate the downward revisions to supply. Guess the balancing account the EIA uses will be shrinking. Anyway, things like GDP could put on a nice move in here. Surprised to see GMXR not up today. Will have a high short, high % of production from gas list out in the morning.

  70. 70
    zman Says:

    WLL – through $86 and continuing to hold my calls and common. See table in post today for the cheapness of the name relative to other oily characters.

    BEXP trying to drift up. May add a little in the May’s.

  71. 71
    VTZ Says:

    Loonie almost at parity with the USD for the first time in a while… I still stand by my statement that it should be much higher.

    Nicky – I agree with you regarding the economic recovery nonsense, although I disagree with the China bubble.

    Dman – Agree fully with the devaluation of the dollar partially responsible for the rise in oil

    My question is how much higher can everybody force this nonsense? The earnings “growth” we’ve seen over the past year is not sustainable whatsoever, in my opinion.

    Could anyone reasonably think 90$ S&P Earnings x 16 = 1440 S&P??

  72. 72
    Dman Says:

    cargo – Marc Faber has been saying the Euro can recover modestly here for a bit. But he’s not talking about a dramatic move.

    While you’re over there, buy some gold and put it in a Swiss bank vault 🙂

    If they’ve got any room left that is.

  73. 73
    Dman Says:

    VTZ – my theory is that when the dollar decline really takes hold and people start panicking, a lot of $$ will go straight across the border and push the loonie much higher.

    At some point capital controls will be imposed to try to halt that. In fact there are already straws in the wind suggesting that is just around the corner: the IMF has revised its long-standing blanket opposition to capital controls. Nice timing. Just when the US is going to need them, the IMF conveniently decides they are OK after all. No good for the 3rd world, but fine for Uncle Sam!

  74. 74
    cargocult Says:

    Dman, would CEF be a reasonable way to play this event?

  75. 75
    Nicky Says:

    10yr just traded at 4%.

  76. 76
    VTZ Says:

    I have no clue why anyone is currently holding their savings in USDs, but hey, if it’s currently good enough for the Chinese…

    The key is that at some point nobody is going to want to hold 2 and 3% paper from a country that has no surplus in sight for the next 20 years and monster deficits for the foreseeable future. If people actually believe in the recovery then why the hell does anyone want 2-3% paper now. We saw this on Friday as rates were bid up. They will continue to do so.

    The breakdown in the biggest bubble of all time – the US long bond – will be the collapse of the dollar.

  77. 77
    VTZ Says:

    Just saw that after I posted Nicky: an important signpost coming from the low rate environment we’ve been in.

  78. 78
    Dman Says:

    cargo – CEF looks good to me. It’s got some silver, which has helped it recently.

  79. 79
    Dman Says:

    Z – can you give a brief backstory on AEZ (eg why the huge plunge to 50c & then recovery)? Also: where does it fit on the cheapness scale?

    Check out BRY. Dang, it was there for the asking at the open.

  80. 80
    zman Says:

    SWN running into resistance at $42.50, just below the confluence of the 50 and 200 day moving averages, thoughts JB or anyone else with a charty bent.

  81. 81
    Popeye Says:

    SD down on merger. Opportunity?

  82. 82
    bill Says:

    if you think sd is oversold buy ard

    every 1 up in sd is worth 5 cents o ard

    so 8 on sd will get you another 2.50 on ard

    i think we might see a late day rally in sd

  83. 83
    wcoaster Says:

    NCOC is in the throes of an insolvency crisis, but makes a tempting play at .38 given all the good coal news. Any opinions to keep me away from the falling knife? Thanks!

  84. 84
    zman Says:

    Dman – I didn’t know them back then at all but I assume the fall was with everything else as oil plummeted. It’s mid range on acreage pricing which is really the only way to price it now as their Bakken program is in its infancy. They just sold some non-core assets to boost their cash position and have no debt. The first Bakken wel came in at a nice rate given the lateral length, a very nice one while I was out of town. The next one should be done around May 1 and could send the name into the higher end of things on a price basis for acres. They are drilling in a relatively untried area and have a good sized block of acreage (about twice that of KOG) and this is also where BEXP has been adding land. Anyway, could see them driving towards double digits, despite the run up already, if oil stays in the $80s.

  85. 85
    bill Says:

    81 yes

    im buying more ard

  86. 86
    zman Says:

    Wcoaster – I got nothing on that one, maybe BSJ?

    Bill – agreed re late rally potential there.

    Tomorrow by the way is a ecodataless day, those have not been kind to the market of late.

  87. 87
    West Says:

    Just a different view on the SD. Before today the short interest was at 26% of float and there should be some addition to that now. So spec play is to take some call options on SD just in case there is a short squeeze for some reason, active put and call action providing good pricing action. I own the common of ARD and I am adding the Sep 6 & 8s on SD.

  88. 88
    Nicky Says:

    Slight pullback looks corrective so higher highs ahead.

  89. 89
    zman Says:

    Number of our names hitting 52 week highs. Hmmm.

  90. 90
    Dman Says:

    Speaking of Canada, I should point out that ERF has broken above a downtrend going back to last June. If it clears resistance at $25 there’s a lot of room to run. Although it tends to walk more than run.

  91. 91
    Dman Says:

    VTZ – I finally got me an Interactive Brokers account. Wow – those commissions are virtually non-existent. Trading platform seems OK, still learning it.

  92. 92
    bill Says:

    Kendall Law Group Investigates Arena Resources, Inc. Merger for ShareholdersLast update: 4/5/2010 12:32:00 PMDALLAS, Apr 05, 2010 (BUSINESS WIRE) — Kendall Law Group is investigating Arena Resources, Inc. (ARD) for shareholders in connection to the proposed sale of the Company to SandRidge Energy, Inc. The national securities litigation firm is investigating whether the Board of Directors of ARD properly shopped the Company prior to entering into the agreement. This possible breach of fiduciary duty may have kept the Company from reaching a deal that would provide better value of the Company. If you are an ARD shareholder and would like additional information about your rights, you are encouraged to contact the Kendall Law Group at 877-744-3728 or by email at hlindley@kendalllawgroup.com. On April 4, 2010, Arena and SandRidge announced that they have entered into a merger agreement for SandRidge to acquire Arena in a $6.2 billion transaction. The cash and stock transaction is expected to close in the second or third quarter of 2010. According to the agreement, shareholders will receive $2.50 in cash and 4.7771 shares of SandRidge common stock per ARD share owned. Based on the closing price of SandRidge on April 1, 2010, this transaction values Arena shares at approximately $40, representing a 17% premium over the $34.26 closing price on April 1, 2010. Arena shares closed as high as $42.69 as recently as March 1, 2010 and as high as $45.05 in January, 2010. Kendall Law Group was founded by a former federal judge, includes a former United States Attorney, prosecutors and securities lawyers who are experienced in complex securities litigation. The firm has been counsel in dozens of merger and acquisition cases nationwide, including some of the largest transactions in the United States. SOURCE: Kendall Law Group

  93. 93
    elijahwc Says:

    Bill – from an earlier convesation today the way we on the dark side see things. “I think the deal gets done two dollars higher to compensate the lawyers.” Agree?

  94. 94
    zman Says:

    Eli – or it gets rejected at rim like the Crusader deal.

  95. 95
    zman Says:

    BEXP starting to wake up, at $17.95. $18 was the old high this cycle. 11% of float short there, gotta be getting tired of this range not breaking down and the continual string of stock moving well catalysts.

  96. 96
    jiveyjr Says:

    I sold half my BEXP to seed this nascent rally in the name

  97. 97
    zman Says:

    Jivey – a little torn on it at the moment. I think if it breaks through that $18 top it could run a bit. I’m thinking I’ll come and reposition in the Mays at this level or the $20s in a few days if it does run.

  98. 98
    zman Says:

    Maybe it was BSJ that I’m thinking of that took ARD in the contest. Hmmm.

    Surprised no one has PETD.

  99. 99
    zman Says:

    Want to see a chart getting no love at all? GMXR daily. Ugh.

  100. 100
    jiveyjr Says:

    from briefing.com re: SD/ARD

    While MKM Partners believes the Arena Resources (ARD)/ SandRidge Energy (SD) merger makes a great deal of strategic sense for SD, they recommend investors avoid setting up this deal because they believe there is a significant chance that a short squeeze may develop in SD. Firm notes SD currently has 210 mln shares outstanding and a short interest of 34 mln shares. They say the short interest exists primarily because SD has two convertible preferred shares outstanding. They suspect that convertible arbitrageurs have shorted SD common to hedge their convertible preferred holdings, and this has used up a good portion of the SD borrow. The proposed merger will create an additional 185 mln SD shares. Firm says the size of this issuance, relative to the current capitalization of SD and the existing short positions, raises concerns for the firm about investors’ ability to find and hold a good borrow on SD to hedge the transaction. They say the deal spread has widened over the morning as the potential borrow difficulties have been recognized in the market.

  101. 101
    TEXWS6 Says:

    San Andreas is the LARGEST (acreage) carbonate oil reservoir in the world. SD had TONS of CO2. Most of the San Andreas is on CO2 flood where they have the infrastructure.

  102. 102
    elijahwc Says:

    #87 Nice call: these comments passing on briefing just now.

    SD: MKM Partners believes the Arena Resources/ SandRidge merger makes a great deal of strategic sense; believe there is a significant chance that a short squeeze may develop in SandRidge (7.51 -0.34)

    While MKM Partners believes the Arena Resources (ARD)/ SandRidge Energy (SD) merger makes a great deal of strategic sense for SD, they recommend investors avoid setting up this deal because they believe there is a significant chance that a short squeeze may develop in SD. Firm notes SD currently has 210 mln shares outstanding and a short interest of 34 mln shares. They say the short interest exists primarily because SD has two convertible preferred shares outstanding. They suspect that convertible arbitrageurs have shorted SD common to hedge their convertible preferred holdings, and this has used up a good portion of the SD borrow. The proposed merger will create an additional 185 mln SD shares. Firm says the size of this issuance, relative to the current capitalization of SD and the existing short positions, raises concerns for the firm about investors’ ability to find and hold a good borrow on SD to hedge the transaction. They say the deal spread has widened over the morning as the potential borrow difficulties have been recognized in the market.”

    The more I think about it most of the outcomes favor a higher price otcome for both SD and ARD and that Ard is the way to lever into it.

  103. 103
    VTZ Says:

    Is anybody going to lighten up on gassy names today? I’m comtemplating that now.

  104. 104
    jiveyjr Says:

    I sold FST/NFX and am thinking of putting out some HK here soon…just like the oilier one’s better

  105. 105
    zman Says:

    VTZ – I am just working on shifting some around, maybe to the higher short interest names, but I’m not done thinking it over. My two gassy names at present are HK and SWN on the call side and both have moved pretty well in the last couple of days. I may shift from the high quality SWN to the lower quality of a GDP or GMXR or I may go with the highly shorted SD as well, but still thinking about it. The GDP and GMXR charts are ugly … GDP economics are good down to low mid $3s gas and probably breakeven close to just over $3. The strip is $4.27 so your IRR is over 20% at present and you have 35% short interest that has just made a lot of money. But still working myself up to buying it for the short squeeze.

  106. 106
    bill Says:

    >chance that a short squeeze may develop in SD.

    that would be a beautiful thing

  107. 107
    zman Says:

    ZTRADE – ZCAT – SWN

    Sold half of my April $41 calls for $2.30, up 175% since entry last Monday. See comment 105 on today’s post for thinking here. I continue to own the common in the ZLT.

  108. 108
    jiveyjr Says:

    re: 106…damn right it would…SD squeezed over $8 could lead to something wunnerful

  109. 109
    zman Says:

    Am thinking same re SD and the premiums are pretty cheap, especially in the money and out a month. Looking at those and the nearer, riskier stuff.

  110. 110
    zman Says:

    ZTRADES: ZCAT

    SD – Added (10) April $7 calls for $0.63 with the stock at $7.56, down 4% on the ARD acquisition today. See site for comments on that.

    SD – Riskier, took (30) of the April $8 calls for $0.15.

  111. 111
    West Says:

    KOG started trading options today it looks like to me.

  112. 112
    zman Says:

    West – that should be fun. Wonder how long it will take us to collapse those ginormica spreads, lol.

  113. 113
    zman Says:

    Nicky – so right in the middle of your range the S&P went flat.

  114. 114
    West Says:

    I would almost write covered calls on KOG but I’m hearing some strong 3fks swirlings from offset operators. This would be a big for KOG even if they are 50% of BKN but I’m hearing more like 75%. Nothing concrete to report but the stock is staying that somebody knows something in my opinion.

  115. 115
    zman Says:

    The most important thing for CNBC to be covering regarding the market now is apparently the Tiger Woods press conference.

    Thanks West, that’s useful. Let me know if you hear any swirlings re EOG’s Montana Bakken well.

  116. 116
    zman Says:

    V – just letting you know what I’m thinking re the gassy names. The run has been ok but nothing compared to the beating they have taken. Saw that TPH is thinking 1 to 1.5 Bcfgpd of overstatement, not sure how far back they are thinking but at least a year. Anyway, could take the Street awhile to buck up their courage but it also could lead them to be more generous with their out quarter price estimates for now, which are 20% or so above the current strip, as opposed to reducing them quickly with their quarter end mark to market procedures.

  117. 117
    Nicky Says:

    Z – re 113 – spx has resistance at 1187 which keeps stalling the rally. If, and its a big if, the SPX can get to 1190 – 92 I think it will then roll over and correct some. SPX is way stronger than Dow today.

  118. 118
    zman Says:

    Thanks Nicky, like double strength today on the SPX. Majors doing well but the energy component of the S&P is up more so it’s probably oil that’s helping the S&P names so much.

  119. 119
    VTZ Says:

    Thanks for the follow up.

  120. 120
    dij Says:

    huge volume on SD, 36 million

  121. 121
    Nicky Says:

    I think they tried to put far too much of a positive spin on Friday’s employment numbers – it was a positive report, but far from one showing “strength” in the economy or labor market… hourly earnings declined, net job “growth” was still not enough to actually push the national unemployment rate down, 1/3 of the jobs were census related, and the number of people out of work for 6 months reached an all-time high. Add to that personal bankruptcies at all time high.. 158K in March alone. (6900 a day!) So what happens to interest rates in a months time if we get an employment report that actually shows a decline in the unemployment rate? 6%?

  122. 122
    Nicky Says:

    Z – good point re # 118. Points back to my earlier comments about commodities leading the final charge.

  123. 123
    zman Says:

    LINE back to $26, all deals forgiven.

  124. 124
    jiveyjr Says:

    WRES at previous high for 2010 2.74…

  125. 125
    zman Says:

    Thanks Jivey, took it off my active watch list but plan on listening to future conference calls there.

  126. 126
    zman Says:

    SWN through the 50 day and looks to be at the 200 day sma at 42.90.

    JB – voted.

  127. 127
    Nicky Says:

    Anyone heard whether the Fed have finished that closed door meeting they were having today on interest rates? It started at 11.30…

  128. 128
    zman Says:

    Nicky – don’t see anything about it.

    PQ looks to be trying a move on decent volume.

  129. 129
    zman Says:

    Analyst Watch: DNR

    Thomas Weisel raised target $3 to $22.

  130. 130
    Jerome Blank Says:

    #80 SWN…dialing down to the 30 min chart, SWN has been consolidating in the 50/200 SMA moving avg resistance zone since about 12PM eastern…SWN looks like it wants to test major resistance at $44-$45 which is a test of the longer term lower channel line daily topside descending triangle trendline and 100 day sma resistance point…

    #126 Zman…thank you

  131. 131
    zman Says:

    Thanks much JB.

  132. 132
    Nicky Says:

    30yr T Bond at low of the day. How much debt are they going to try and sell this week – good luck with that.

  133. 133
    zman Says:

    HK one of the better performers on the day amongst a strong gas group … not often I get to type that.

  134. 134
    Paul in Kansas City Says:

    no kidding on HK; i’m glad (today) i stuck with my April call positions; these have been tough to trade.

  135. 135
    choices Says:

    Thus far, I believe at least three law firms have announced investigation into SD/ARD deal-

  136. 136
    zman Says:

    VTZ – I turn my back and SU went from 30 to $35 in a week.

  137. 137
    choices Says:

    fairly heavy vol in SD calls, Jun 9’s over 13,000

  138. 138
    Jerome Blank Says:

    #133 HK and SWN have very similar technical structures at the moment…both are on P&F sell signals in X’s…HK has broken that descending channel line but runs into material resistance at about $23….RRC also has a similar technical structure, but has the advantage of still being on a P&F buy signal having just held major P&F trendline support…

  139. 139
    zman Says:

    JB – thanks, same still on buy for UPL too?

  140. 140
    zman Says:

    OPEC tweaking shipments to the U.S. higher, could be a move designed to begin capping this rally closer to $80 to $85.

  141. 141
    Alhambra Says:

    strong buying in gmxr into close

  142. 142
    zman Says:

    re 141. Ha, that figures, lol. People shopping through the short interest lists, it’s #2 behind GDP on the heavily shorted gassy names list.

  143. 143
    john11 Says:

    SD’s Tom Ward on cnbc Fast Money sometime in the 5 to 6 hour

  144. 144
    Jerome Blank Says:

    #139 UPL…very interesting chart…UPL is trading right up against P&F trendline resistance…a $50 print puts UPL on a new “quad top” buy signal….

    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3724280

  145. 145
    zman Says:

    BEXP – going out near the HOD at 17.95, this would be the highest close this cycle for the name. Looking at the weekly chart we are again at mid 2008 resistance. With just over half the oil price and about a third of the gas price but better prospects on the future for the company. If we break out from here I’d guess $20 is a logical next target with them doing a deal sometime after that.

  146. 146
    zman Says:

    Thanks John and JB

  147. 147
    zman Says:

    Beerthirty.

  148. 148
    Nicky Says:

    I would think it likely a short term top comes on Wednesday.

  149. 149
    john11 Says:

    BEXP files mixed shelf.

  150. 150
    john11 Says:

    ROSE operational update released.
    http://finance.yahoo.com/news/Rosetta-Resources-Inc-pz-2426881517.html?x=0&.v=1

  151. 151
    zman Says:

    BEXP – nothing like being prepared.

    ROSE – operational update on the tape.

  152. 152
    john11 Says:

    BEXP Brigham Exploration announces 13M share seconday offering through Credit Suisse and Jefferies

  153. 153
    john11 Says:

    Brigham Exploration Announces Acceleration of Its Williston Basin Development Drilling Program to Eight Operated Rigs and Commencement of a Public Offering of 13,000,000 Shares of Common Stock

  154. 154
    zman Says:

    Wow.

  155. 155
    elijahwc Says:

    Maybe those four new rigs will be located near AEZ’s acreage. lol

  156. 156
    john11 Says:

    news flying all over…
    HOUSTON, April 5, 2010 (GLOBE NEWSWIRE) — Rosetta Resources Inc. (Nasdaq:ROSE – News) (the “Company”) announced today it intends to offer $200 million in aggregate principal amount of senior unsecured notes due 2018, subject to market and other conditions. The notes will be offered only to qualified institutional buyers under Rule 144A under the Securities Act of 1933, as amended, and to non-U.S. persons outside the United States under Regulation S under the Securities Act.

  157. 157
    elijahwc Says:

    ROSE likes money too: ROSE Rosetta Resources announces a $200 mln sr unsecured notes offering

  158. 158
    zman Says:

    Guess they couldn’t wait. Adding $95 mm to the their budget, the rest goes on the balance sheet.

    With the shoe this comes to about 15 mm shares, which is 15% of current outstanding shares.

    The last offering they did was in October at $10.50 and was received warmly by the market then, with barely a hiccup in the shares before they moved higher.

  159. 159
    Garyinhou Says:

    likely short term effect bexp with offering.. down i suppose

  160. 160
    zman Says:

    Down probably 10% on the open, maybe 15%. I would not expect it to last very long.

  161. 161
    Garyinhou Says:

    down 52 cent after close

  162. 162
    Garyinhou Says:

    groovy..

  163. 163
    RobBanks Says:

    z – you were right about BEXP. CEO talked up his company’s achievements in an odd, mid-day, release just prior to a 3 day weekend.

  164. 164
    zman Says:

    Glad to see Jefferies is co running the book. Should see numbers move up significantly post deal.

  165. 165
    RobBanks Says:

    I don’t understand 164. Does it refer to BEXP?

  166. 166
    zman Says:

    Yes, they are particular good at handling quick secondaries.

  167. 167
    elijahwc Says:

    KOG: An exercise and sell of 50,000 for Chm Catlin. Exercise at 1.08 and sale at 3.46. Not a bad day but wait as these are the second time around having been exercised 4 yrs 5 months after vesting so not a bad 5 years!

  168. 168
    zman Says:

    Samson on the tape with a 1,112 BOEpd from a partial frac of their Bakken well (5 of 16 stages completed so far, update to follow in I would bet a week). That’s a good rate for a partial frac for their first time out with a horizontal with a medium length lateral … market should like it.

  169. 169
    baylor3217 Says:

    Thoughts on re-entering BEXP and timing? I sold thanks to the recommendation of some folks’ spidey sense on here. Thank you for sharing that idea.

    Opportunity presenting itself tomorrow or is that too soon?

  170. 170
    zman Says:

    Baylor – depends on where it opens. I think that the dip will be short lived and could be boosted by any continued run in oil prices. I don’t think they would have done the secondary unless they were planning to take guidance up pretty stoutly post deal.

  171. 171
    baylor3217 Says:

    after market showing down around 3.4%. We’ll see what happens in the AM.

  172. 172
    best personal financial Says:

    best personal financial

Leave a Reply

Zman's Energy Brain ~ oil, gas, stocks, etc… is is proudly powered by Wordpress
Navigation Theme by GPS Gazette

s2Member®