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Energy Merger Boom: Deals to Watch

NEW YORK ( TheStreet) - Energy and oil deals are dominating the M&A landscape as cash rich companies move to pounce while the timing is right.

Norwegian oil giant Statoil (STO - Get Report) has agreed to buy Brigham Exploration (BEXP) for $36.50 in an all cash deal. The deal values Brigham at roughly $4.4 billion and is a more than 20% premium to its Friday close.

Brigham shares rose over 18% to $36 a share in pre-market trading.

The Austin, Texas -based company, founded by Ben "Bud" M. Brigham in 1990, has grown in recent years based on its oil and gas shale exploration focus in the in the Williston Basin of North Dakota and Montana. The shale formations are called the Bakken and Three Forks shale. The price paid is slightly below a $37.87 a share all time high it reached in March.

According to a press release announcing the deal, chief executive Brigham said, ""A bigger enterprise with a larger balance sheet will be better positioned to take advantage of our large and growing inventory of Williston Basin drilling locations and the associated assets." Statoil CEO Helge Lund said about the deal, "Entering the Bakken and Three Forks tight oil plays and taking on operatorship represents a new significant step for Statoil."

According to the company's website, it acquired its first drilling leases in the basin in 2005 with a 46,000 acre purchase. The company now has nearly 400,000 acres of leases in the basin and has drilled 38 wells.

The shale driller reported a profit of $42.9 million in 2010 on revenue of nearly $180 million after being loss making in the two previous years. In its latest quarter ended on June 30th, Brigham reported a net profit of $70.8 million on a company record production of12,206 barrels of oil a day. It also reported it spent nearly $325 million on exploration capital expenditure in the first 6 months of the year - and $362.2 million in cash and short-term investments on hand.

Brigham expects its production to multiply as high as 100,000 barrels of oil a day in five years, according to its press release. It also expects to drill 140 wells a year, making larger cash critical.

The merger has been approved by Brigham's board, which owns 2.5% of the company's shares and it expects to take the merger to shareholders for approval on October 31. According to the deal announcement, Brigham expects the merger to close at the end of 2011 or early 2012.

Brigham Exploration hired Jefferies (JEF) to be its financial advisor on the merger. Goldman Sachs (GS - Get Report) and Tudor Pickering Holt acted as financial advisors to Statoil.

Kinder Morgan (KMI - Get Report) agreed to buy El Paso (EP) for $21.1 billion in a cash and stock deal.

The transaction, which values El Paso at $38 billion including El Paso's outstanding debt creates the largest network of natural gas pipelines in the U.S. and is the largest energy merger this year.

It's also the second largest takeover this year after AT&T's (T) $39 billion purchase of T-Mobile in March, although that deal has been blocked by the U.S. Department of Justice on antitrust concerns.

Kinder Morgan and El Paso announced the transaction in a news release Sunday.

The deal values El Paso shares at $26.87 each, a 37% premium to their closing price Friday of $19.59. It also represents the highest price for the company's stock since it went public in 2006.

Kinder Morgan will pay El Paso $14.65 a share in cash and will contribute its shares at a ratio of 0.41 and its warrants at a ratio of 0.64 to El Paso shares to assume all of its outstanding stock. The deal is expected to close in mid-2012 and will give Kinder Morgan shareholders a 68% ownership of the combined company; El Paso shareholders will own the remaining 32%.

El Paso shares rose more than 30% to $25.60 a share in pre-market trading.

"This once in a lifetime transaction is a win-win opportunity for both companies," Kinder Morgan founder and CEO Richard D. Kinder said in the news release. "The natural gas pipeline systems of the two companies are very complementary, as they primarily serve different supply sources and markets in the United States."

The combination will create the nation's largest natural gas pipeline and biggest independent transporter of petroleum.

It also will create the fourth largest energy company in the U.S., according to the news release.

As part of the merger, Kinder Morgan will sell El Paso's oil and gas exploration and production assets to help pay for the deal. It also expects the combination to boost shares immediately because of the cash flow of the combined companies.

Kinder Morgan also said it has a commitment from Barclays Capital (BCS) to raise the nearly $15 billion in funds required for the cash portion of the purchase.
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