Petrohawk a Top Natural Gas Target: Poll

NEW YORK ( TheStreet) -- Chevron's ( CVX) acquisition of Atlas Energy ( ATLS) last week started the latest round of M&A speculation in energy. It wasn't just chatter, but trading in natural gas stocks right after the Chevron deal was announced that showed investors expect more independent oil and gas producers to be taken out, as the integrated major oil companies continue bulk up on unconventional assets.

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Five of the biggest targets of M&A speculation had big weeks in trading last week, with double-digit gains, but most of the bounce came in trading right after the Chevron deal was announced. By the end of the week, the speculative natural gas acquisition plays had traded off with the rest of the markets, and on Monday morning, the nat gas M&A speculations stocks opened in the red.


It doesn't mean that investors don't expect these independent gas producers to be acquired, though. The stocks were still up in the range of 6% to 8% over the past five trading sessions even though the huge gains to open last week had moderated.

On Monday morning, Jefferies raised its price target on Petrohawk Energy ( HK) to $22 and noted, according to a synopsis of the Petrohawk outlook reported on Benzinga.com, "The quality of HK's acreage is undeniable. However, in this gas price environment, the valuation of its assets is tough. While a good number for its Fayetteville sale should drive the stock in the short-term, further upside could be driven by the market's realization of the value of midstream."

Investors who have been following the acquisition activity in the energy space might be wise to recall that Jefferies energy investment banking team has become a leader in these deals, and had a prominent role in the Chevron-Atlas Energy transaction.

It's no surprise, then, that a recent poll of TheStreet readers revealed that Petrohawk is the consensus bet to next be acquired by an oil major looking to bulk up on natural gas. Approximately 38% of survey respondents said that they were placing their bet on Petrohawk to be the next acquisition. Last week's trading activity reflected this survey sentiment, too, with Petrohawk up in trading slightly more than the rest of the usual suspects in the nat gas M&A landscape.

Whichever firm, or firms, is acquired next, timing may be harder to peg than the likely takeover target.

An independent like Range Resources ( RRC), for example, could command a much higher premium for its acreage than Atlas Energy, and that could mean a much longer road to getting buyer and seller to shake hands across the bargaining table.

Range Resources is a popular choice among natural gas targets, anyway, given the attractive nature of its assets. Range Resources and Ultra Petroleum ( UPL) finished second and third among survey takers. Roughly 22% of energy investors are placing their bets on an acquisition of Range Resources. Another 20% of energy speculators in the survey audience think that Ultra Petroleum will be the next major natural gas-themed takeout.

Some investors may not be trying to time the profit-taking opportunity in these nat gas plays over more than a week. After popping by double digits after the Chevron-Atlas Energy deal was announced, both Petrohawk and Ultra Petroleum have come back down to share prices lower than their post-Chevron deal high, as of Monday morning trading.

Cabot Oil & Gas ( COG) and EQT Corporation ( EQT) were way down on the list among energy stocks where investors are placing their M&A bets, even though they are constantly chattered about on the natural gas M&A rumor mill. Only 11% of survey respondents think Cabot Oil & Gas is likely to fall next, and only 10% think an acquisition of EQT is going to occur before an acquisition of the other natural gas targets.

-- Written by Eric Rosenbaum from New York.

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