5 Energy Deals Not to be Forgotten in 2012

NEW YORK ( TheStreet) - After Chesapeake Energy ( CHK) and Devon Energy ( DVN) both unveiled shale stake spins worth over $4.5 billion on Tuesday, investors should be reminded that there is more than enough dry powder to fuel an energy deal boom in 2012.

Chesapeake Energy sold a 25% stake in its Utica shale joint-venture with EnerVest to French oil giant Total ( TOT) for $2.3 billion, meanwhile Devon Energy announced a sale of a 33% stake in five of shale prospects to Sinopec ( SIPC) of China for $2.2 billion, giving a fast start to 2012 energy M&A after the sector led 2011 deals.

On news of their deals and rising oil and gas prices, Devon Energy and Chesapeake Energy shares spiked in Tuesday trading. With continued bullishness in the oil and gas sector, companies like BP ( BP), Marathon Oil ( MRO), SemGroup ( SEMG), El Paso ( EP ) currently being acquired by Kinder Morgan ( KMI) for $37.9 billion in the largest deal of 2011 , Quicksilver Resources ( KWK) and Chesapeake Energy could see a similar deals -based jolt if pending spinoff and divestiture plans were to be realized.

Even with its shale stake sale, Chesapeake Energy may not be done cutting deals after a big first trading day of 2012. The company was one of the the 5 most crazy company sellers since the financial crisis, and it's still got further asset spin plans.

In September, Frac Tech, a shale gas drilling specialist partly owned by Chesapeake Energy planned an IPO to raise $1.15 billion, only to hold the offering on a weakened oil and gas services industry outlook in December. In the meantime, the Wall Street Journal reported last month that potential Chinese and Saudi bidders could offer up to $2 billion for Chesapeake's stake in the company, providing a big windfall. Chesapeake Chief Executive Aubrey McClendon said in November that the stake could be worth $3 billion. McClendon added that an IPO of Chesapeake's oilfield services unit could draw up to $7 billion, Bloomberg reports.

Devon and Chesapeake's Tuesday sales were just two of many pending energy deals to watch for in 2012. Here are five other deals that are already in progress.

5. A Quicksilver Resources Barnett Shale Spin?

In October, Quicksilver Resources ( KWK) said it will sell interests in its Barnett Shale assets in a spinoff causing shares to rally and then sink. By creating a master limited partnership of roughly 18% of its shale assets in the Fort Worth, Texas- Barnett Shale, Quicksilver then expects to IPO the partnership in a tax free manner that is said could raise $400 million. With the funds, Quicksilver intends to retire almost half of its $940 million in callable debt by the end of 2012.

"The creation of this MLP achieves several goals for Quicksilver. We believe we will be able to monetize a large maturing asset base at attractive prices which can eliminate all of Quicksilver's existing public debt over the next few years," said Glenn Darden, CEO of Quicksilver when announcing the deal.

To be seen is whether an ensuing stock slump will cause Quicksilver Resources to reconsider the spin or look for different strategic alternatives.

When the plan was unveiled Lazard Capital Markets' Drew Venker raised the question of whether Quicksilver could raise the money it projected via a spin.

In another October note, Brian Corales of Howard Weil wrote, "This deal came as a bit of a surprise but is positive. KWK clearly needs to raise capital to reduce the Company's debt." Corales expected the company to raise money by entering a joint-venture in its interest in a Horn River Basin pipeline or selling its BreitBurn Energy Partners stake.

Previously, chief executive Thomas F. Darden and his family had shown interest in taking the company private, but reversed course this March. The Darden family founded the Fort Worth -based Quicksilver in 1963 and took it public in 1999.

4. Marathon Oil Consolidates Deepwater Assets.

After making a big shale push with a $3.5 billion purchase of KKR ( KKR)-owned Hilcorp Resources and its Eagle Ford shale assets, Marathon is expected to consolidate its deepwater oil exploration portfolio. In a November third quarter earnings release, Marathon said that it would look to sell up to $3 billion in non-core assets - following a spin of its refining and marketing operations now called Marathon Petroleum Company ( MPC) after a June IPO. Separately, Marathon Petroleum announced a sale of its 50% stake in the Seaway Pipeline to Enbridge ( ENB) in its third quarter earnings.

Also in November, Bloomberg reported that Marathon Oil was in talks to sell its Angolan offshore operations to Sinopec and other Asian buyers for $800 million, according to two people with knowledge of the process. Reports also indicated that Marathon may look to sell 30% of a joint venture in its Gulf of Mexico deepwater assets for $1 billion to Asian buyers as part of the Houston -based company's announced plans of oil asset sales.

Currently, Marathon has a 10% interest in a key deepwater drilling asset offshore of Angola called Block 32, where Total has a 30% interest and the Angolan state-owned oil company Sonangol has a 20% interest.

After pursuing an ambitious split of its exploration and downstream assets, to be seen is how Marathon Oil will consolidate its deepwater oil assets as it pushes into shale.

3. Plains All American Pipeline's SemGroup Bid

In November, energy pipeline transporter SemGroup ( SEMG) rejected a $24 a share hostile bid by Plains All American Pipeline ( PAA), rebuffing a $1 billion October bid in another crinkle for the multi-year takeover saga. But who's to say all deal talks are off?

The bid wasn't the first time Plains made a play at SemGroup, only to see its offer called "opportunistic" and "undervalued." The now quashed hostile bid was a culmination of almost two years of opposition by Plains to SemGroup's recovery strategy from a 2009 bankruptcy and resulting civil litigation with the Securities and Exchanges Commission. In March 2010, Plains offered to buy SemGroup out of bankruptcy for $17 a share. The offer that was rejected by SemGroup's board and company instead went public in November 2010 and priced at over $24 a share on the first day of trading.

In August, SemGroup announced it would raise $181 million by doing a public offering of Rose Rock Midstream ( RRMS), which it IPO'ed a 41% stake of in December at $19 a share, raising $140 million. SemGroup also announced a spin of its SemStream businesses to NGL Energy ( NGL) for $279 million in cash in in November.

SemGroup's followed its post-bankruptcy planning on its terms - but to be seen is whether spins and continued obstinacy will curtail Plains from making a bid that SemGroup or its shareholders can't refuse.

2. BP Shops its Pan American Energy Stake

In November, British oil giant BP saw a $7.1 billion deal to sell a majority 60% stake in an Argentinean oil venture called Pan American Energy for $7.1 billion fall through when its partners Bridas of Argentina and CNOOC ( CEO) of China objected to negotiations. The move was a hit to BP, which in October announced it would raise $45 billion through divestitures by 2013.

Currently, BP is contesting its Gulf of Mexico oil spill liability with Halliburton ( HAL), which is the contractor that provided cementing on the Macondo well piping. Earlier in January, BP argued in New Orleans court that Halliburton should be held liable for spill related costs, which Bloomberg reports have already hit $21 billion and could reach the $40 billion that BP has provisioned for.

After CNOOC and Bridas walked away from BP's Pan American sale, the company indicated in a statement that it would be "happy to return to long-term ownership" of the assets after its finances improved. In November, BP said that its sale program is focused on eliminating "non-strategic assets and not driven by a requirement to raise cash."

Nevertheless, BP returned quickly to the deals table, plugging its M&A spill. In December, BP sold its natural gas liquids business in Canada to Plains All American Pipeline ( PAA) for $1.67 billion.

Depending on the outcome of the Halliburton litigation, spill-related costs and oil prices, BP may or may not be eager to reach its recently announced $45 billion divestiture mark.

Since June 2010, BP has announced over $17.5 billion in assets, with just over $10 billion in sales coming from oil exploration and production assets, according to data compiled by Bloomberg as of December -- less than 40% of its divestiture goal.

1. El Paso Asset Spins or Sales

In October, Kinder Morgan purchased El Paso in the largest deal of 2011 that valued the company at $38 billion and quashing a previous plan by El Paso to spin its oil exploration and production assets. In May, El Paso unveiled a spin of its exploration business, which contains valuable Haynesville and Eagle Ford shale assets in an IPO that would create a standalone company valued at $4.7 billion.

After Kinder Morgan stalled those IPO plans, the exploration asset sales are still expected. When announcing the merger, Kinder Morgan said it will fund the hefty price in part by selling El Paso's exploration assets, according to Chief Executive Richard Kinder.

For Kinder Morgan, the deal was part of an effort to bolster its already giant pipeline operations, targeting the transport of the oil and gas coming from the shale boom currently underway in New York, Louisiana, Texas, North Dakota, Pennsylvania and Ohio among other regions. With El Paso, Kinder Morgan would become the largest independent natural gas and petroleum transporter in the U.S.

Currently, the deal is being contested in Delaware courts by some El Paso shareholders who object to the takeover in favor of the previously announced asset spin. If the merger were to be approved in 2012, the next question is whether Kinder Morgan would spin El Paso's exploration assets in an IPO or look for an outright buyer.

-- Written by Antoine Gara in New York