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Rockies energy firms targets for acquisition
Heather Draper Dow Jones Newswires
Four down, two to go?
In early June Prima Energy Corp. became the fourth Denver-based independent oil and gas producer to be acquired since April. Analysts say it illustrates again that large energy companies recognize the resource potential in the Rockies.
“It just shows you that mid- to larger-sized independents (oil and gas companies) are desperate for growth and there aren’t many places left you can get it,” said Dave Tameron of Stifel Nicolaus & Co. in Denver.
The Rocky Mountain region is the only area left in the continental United States that hasn’t already had its natural gas resources extensively exploited, he said.
Petro-Canada, of Calgary, Alberta, agreed to pay $534 million, or $39.50 a share, for Prima.
“I think Petro-Canada overpaid, to be honest with you,” Tameron said. “But I think they really wanted to expand their Rocky Mountain assets.”
The deal follows the recent acquisitions of Denver energy companies Tom Brown Inc. by EnCana Corp.; Westport Resources Corp. by Kerr-McGee Corp.; and Evergreen Resources Inc. by Pioneer Natural Resources. Patina, Western Gas may be next The Prima acquisition June 9 turned the spotlight on the few remaining independent oil and gas-producing companies left in the Rockies. The two that Tameron thinks are next to go are Patina Oil & Gas Corp. and Western Gas Resources Inc., both based in Denver.
“As the list continues to dwindle, we believe visibility will continue to increase for both Patina and Western Gas,” Tameron wrote in a research note June 10. “Both of these companies are takeout targets, and we view both as undervalued given recent transaction prices.”
Tameron doesn’t own shares in any of the companies mentioned and Stifel Nicolaus hasn’t provided investment banking services to them in the last 12 months.
Other potential Rocky Mountain targets include Ultra Petroleum Corp. of Houston and St. Mary Land & Exploration Co. of Denver.
Analyst Stu Wagner of Petrie Parkman & Co., an energy research and investment banking firm in Denver, didn’t want to guess which gas company might go next.
But he said the recent consolidation is part of an ongoing cycle in which executives of small private oil and gas firms take their companies public, build up value in the company, sell it and then look to start another private company.
“There is no doubt some of these managements (who recently sold their companies) are looking to start up private companies,” Wagner said. “I would be surprised if we don’t see some new private entities formed in the next six months.”
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