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ARC has been opining for some time now on how low oil and natural gas prices would present opportunities for stronger companies to acquire weaker companies' oil & gas acreage, products or solutions at dimes on the dollar that they would have paid a little less than one year ago. Although not as large as the blockbuster deal of Shell acquiring BG deal, Noble Energy Inc. agreed to acquire Rosetta Resources Inc. for $2.1 billion in stock, giving the natural gas and oil producer a position in two of the largest areas of shale production in Texas. It's the largest takeover of a U.S. oil and gas producer announced this year, according to data compiled by Bloomberg.
Noble will also assume Rosetta's net debt of $1.8 billion, the companies said in a statement on Monday. The per-share offer is valued at $26.62, a 38 percent premium to the target's closing price on Friday. The Eagle Ford basin was the most productive U.S. oil field at the end of 2013, according to the latest Energy Department data.
The premium for Rosetta is below average for the sector over the past five years, suggesting there are more mergers to come, said Fadel Gheit, a New York-based analyst for Oppenheimer & Co. "We're going to see a lot of mergers and acquisitions," Gheit, who rates Noble shares at market perform and owns none, said Monday in a telephone interview. "Everybody is looking for the big deal."
Rosetta's assets include 50,000 acres in the Eagle Ford and 56,000 acres in the Permian. Rosetta produced 66,000 barrels a day of oil and gas in the first quarter from the two regions, of which more than 60 percent was liquids.
Although ARC sees value in such acquisitions as a natural competitive response to the current low oil and natural gas price environment, ARC does not think such mergers will provide maximum value to shareholders if such as acquisitions are not followed up with continued investments in automation and technology that will help drive down cost, increase time to first oil or gas, and increase collaboration within companies and among the larger ecosystem that comprises the oil & gas value chain.