While Hurricane Ernesto's strong winds don't appear headed to the Gulf of Mexico, another sort of wind blew into the exploration business Monday, a strong merger wind. In a move that surprised just about everyone, Woodside Petroleum, an Australian-based firm with interests in the Gulf, offered $23 to $24 per share for control of Energy Partners ( EPL), a New Orleans exploration and production business with strong ties to the Gulf of Mexico. The offer is certainly intriguing to Energy Partner shareholders, who would realize a 33%-plus premium based on Friday's close. And the deal should be intriguing to the company's directors, sans one minor detail: The company is in the final stages of completing its own merger, purchasing Stone Energy ( SGY), another exploration company with a focus on the Gulf of Mexico. Therein lies the rub. Woodside consummating a marriage with Energy Partners would require EPL to leave Stone at the altar, literally. Woodside has conditioned its offer on Energy Partners' rejection of the Stone merger.
Energy Partners' decision to bid for Stone did not come lightly. In fact, Stone was in the process of working through a merger with Plains Exploration ( PXP) when Energy Partners came a-calling. Stone considered both deals carefully, and only after EPL agreed to front the $43 million-plus breakup fee due Plains did Stone agree to walk down the aisle with Energy Partners.