Friday, October 14, 2005

Vintage is acquired

Vintage Petroleum was today acquired by Occidental Petroleum at a sizable premium. I had mentioned Vintage when I posted here and here on oil & gas in the Rockies. I had not dared to buy any Vintage shares then, since, at around $20, they seemed expensive. What did I know! They are being acquired at around $49/share!

The other independent oil & gas producers based in Oklahoma and Texas are expensive, given the runup in oil & natural gas prices. I will not be touching them, but they could still get a decent premium in buyouts from current prices.

This deal comes just days after Spinnaker was acquired by Norwegian major, Norsk Hydro, for around $2.4 billion in cash!

Occidental (OXY), though overvalued right now, is a good long-term buy. Occidental was a major player in Libya before that country turned a pariah. Now that Libya is back as a friendly nation, Occidental should be able to play a major role in helping Libya exploit its vast reserves. Libya and Western African countries will play a major role as backup sources, if (or rather, when) Middle East supplies get disrupted.

Smaller/independent oil & gas players in the Rockies still look attractive to me. Since my last post on the topic, I have bought a few shares of Edge Petroleum (EPEX) and Warren Resources (WRES). Both are still very attractive. Credo (CRED), Whiting (WLL), Delta (DPTR) and Petroleum Development (PETD) are still fairly valued and worth adding at current prices.

One clear indication of a top in oil & gas prices will be when takeover frenzy in this sector reaches the level seen in 80's. Compared to that level, we are just in a very early phase. The only thing common so far is that Boone Pickens is featuring in this boom too, though mostly in the background unlike his role (Mesa Petroleum) then. Pickens pocketed a nice change with the Spinnaker buyout.


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