An Indian Civilizational Perspective

Natural Gas and Oil M&A candidates

Now that Conoco-Philips is buying Burlington Resources – which is a Natural gas company. It is said that NG is probably a more important and profitable resource than Oil. That is why NG companies will come in vogue for take-over companies rich in cash.

This article from Motley Fool used this criteria:

– First, efficiencies in finding and developing energy assets. The less you have to pay to find your energy, the more profitable you can be.
– Second, long-lived assets supported by a nice reserve replacement ratio — the ratio between additional proven reserves and energy production. This can help to ensure years of good production.
– Third, good return on capital — a strong ratio of the cash flow generated from each barrel versus the costs to find and produce it.
– Wrap it all up in a nice valuation, based upon cash flow and enterprise value-per-unit of proven reserves, and you’re good to go.

.. and came up with these candidates:

– Apache Corp (NYSE: APA)
– ChesapeakeEnergy (NYSE: CHK)
– Occidental Petroleum (NYSE: OXY)
– Ultra Petroleum (AMEX: UPL)
– XTO Energy (NYSE: XTO)

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