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Possible Oil & Gas Takeover Targets That Aren't In The Permian Hot Spots

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There's been a lot of excitement in the oil and gas sector this week, with Noble Energy Inc. (NYSE:NBL) announcing a $2.7 billion acquisition of Clayton Williams Energy Inc. (NYSE:CWEI) and Exxon Mobil Corp. (NYSE:XOM) agreeing to buy 250,000 acres in the Delaware Basin from the Bass family for up to $6.6 billion, doubling its resources in the Permian Basin to 6 billion barrels of oil equivalent. What could be next?

Other Permian players operating in the Delaware and Midland basins could be taken out, with analysts previously mentioning companies such as Energen Corp. (NYSE:EGN), Laredo Petroleum Inc. (NYSE:LPI), PDC Energy Inc. (NYSE:PDCE) and SM Energy Inc. (NYSE:SM) as possible targets. But with prices getting sky-high in the country's most profitable play (averaging $33,000 per acre), some dealmakers are beginning to look at basins outside the popular areas in the Permian where properties -- and companies -- can be had for a fraction of the price.

Some are whispering that Ring Energy Inc. (NYSE:REI) could be a takeover possibility with its promising properties in the Central Basin Platform, a less popular prospect in the Permian that dates back to the 1920s where companies have been quietly picking up acreage recently. One of them is Goldman Sachs & Co.-backed Opal Resources II LLC, which was the high bidder this past May for a 341.56-acre parcel in the area with an offer of $752 per acre, according to the New Mexico State Land Office.

Other companies operating in the Central Basin Platform include Apache Corp. (NYSE:APA), Energen Corp. (NYSE:EGN) and Comstock Resources Inc. (NYSE:CRK) as well as Samsung- and Korea National Oil Corp.-owned Parallel Petroleum LLC, Kayne Anderson-backed Triumph Energy Partners LLC, EnCap Investments LP-backed Forge Energy LLC, Boyd & McWilliams Operating LLC and the billionaire Hunt family's Petro-Hunt LLC.

In South Texas, the Eagle Ford is also starting to see more deal flow, with this month alone seeing Anadarko Petroleum Corp. (NYSE:APC) agreeing to sell its properties there to Sanchez Energy Inc. (NYSE:SN) and the Blackstone Group LP (NYSE:BX) for $2.3 billion and SM Energy Inc. (NYSE:SM) selling non-operated assets to KKR & Co. LP (NYSE:KKR)-backed Venado Oil and Gas LLC for $800 million.

Analysts at Tudor, Pickering, Holt & Co. Securities think private equity firms will continue to be the most likely consolidators "as buyers search for liquids exposure at reasonable prices." They think both Pioneer Natural Resources Co. (NYSE:PXD) and Devon Energy Corp. (NYSE:DVN) would be rewarded if they sold their properties in the Eagle Ford, with Pioneer possibly bringing in $1.5 billion to $2 billion and Devon $2.5 billion to $3 billion. Other possible sellers: Cabot Oil & Gas Corp. (NYSE:COG), Noble and Matador Resources Corp. (NYSE:MTDR), which has been thought to be a potential takeover target because of its valuable properties in the Delaware Basin.

Also getting attention is the Mid-Continent, most notably the Anadarko Basin, home to the popular Scoop and Stack plays, and the Mississippian Lime ("Miss Lime," as it's often called). Midstates Petroleum Co. Inc. (NYSE:MPO), which has properties in both areas, recently exited bankruptcy, which would lead some to think that bondholders would have already handed over the keys if there were an interested buyer. "But as investors start looking beyond the Permian for oil exposure, the stock should work," says Ray Deacon, an analyst at Coker Palmer Institutional. The firm is expecting the company to generate free cash flow this year - perhaps $54 million, or $2.16 per share, dropping to $39 million, or $1.56 per share, in 2018.

Up in the Rockies, the Denver-Julesburg, or DJ, Basin in Colorado is also garnering some attention, as private companies Ward Petroleum Corp. (which attracted backing from Trilantic Capital Partners in 2014 but whose founder died last year) and Great Western Oil & Gas Co. (backed by the Broe Group) are starting to see some good results close to the Adams county border, Deacon says. The area is east of the area where Extraction Oil & Gas Inc. (NASDAQ:XOG) said in its initial public offering it had high hopes based on some 100,000 barrel vertical wells drilled previously. Whiting Petroleum Corp. (NYSE:WLL) is thought to be a takeout possibility, as it owns 129,035 net acres in what it calls "the new and large oil prone sweet spot of the eastern DJ Basin."

Bonanza Creek Energy Inc. (NYSE:BCEI), which is active in the DJ Basin, could also be picked up. Bill Barrett Corp. (NYSE:BBG) revealed in a Securities and Exchange Commission filing Tuesday that it was interested in combining with Bonanza once it reorganized (Bonanza filed for bankruptcy earlier this month). It makes a lot of sense: Both companies have $50 million in general and administrative expenses, which, if combined, could add a lot of value, Deacon says. Bonanza's stock jumped 50% on the news that day to $2.79 per share.

Finally, there's the Marcellus Shale in Appalachia, which is more of a gas play than an oil one. Earlier this month hedge fund ChapterIV Investors urged EQT Corp. (NYSE:EQT) to merge with other companies in the area, including Antero Resources Corp. (NYSE:AR) and Range Resources Corp. (NYSE:RRC).

While Range said it neither had been contracted nor was planning any discussions with EQT, there are still a lot of wounded companies in the Marcellus that could stand to be taken out, according to Deacon. Those names include Warren Resources Inc. (NASDAQ:WRES), which emerged from bankruptcy in October, as well as Rex Energy Corp. (NASDAQ:REXX) and Eclipse Resources Corp. (NYSE:ECR), which could probably accelerate activity on its own but is likely better off combining with someone else, he says.