The Rising Influence of Rising Affluence

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These Companies May Be Targets If ExxonMobil Goes Shopping

http://blogs.barrons.com/stockstowatchtoday/2015/03/05/these-companies-may-be-targets-if-exxonmobil-goes-shopping/?mod=BOLBlog

By Ben Levisohn

Wolfe Research’s Paul Sankey and team think ExxonMobil (XOM) will go shopping for a smaller rival–and believe Anadarko Petroleum (APC), Hess (HES), Continental Resources (CLR), and Whiting Petroleum (WLL) could be potential targets. He explains his reasoning:


We re-shape our ExxonMobil target takeover list based on management comments at [yesterday's] analyst meeting, which suggested to us that an opportunistic acquisition is increasingly likely, particularly if low prices persist into 2016. We interpret management as openly talking M&A. Our assumption is that the “top target” for a deal would include US unconventional, led by the “Big Three” plays where they already have scale and learning: Bakken, Permian and Woodford/Ardmore. Eagle Ford appears to have dropped to relatively unattractive on ExxonMobil’s weak current position there, and the persistently high cost of entry. The list of potential targets of size in the Bakken is relatively short – Hess, Continental Resources, Whiting Petroleum. Eagle Ford focused names may be out – so no EOG Resources (EOG), nor Marathon Oil (MRO). Globally, Canada and Brazil are both relatively unattractive. Deepwater Gulf of Mexico and West Africa attractive – Anadarko Petroleum matches well here. Company feels long-to-balanced LNG. Overweight refining. [ExxonMobil] is getting many offers, but is not going to pay a premium for a bad balance sheet vs. its own AAA rating (only one in oil and one of only 3 AAA corporate ratings).

ExxonMobile has dipped 0.3% to $86.88 at 1:33 p.m. today, while Anadarko Petroleum has slipped 0.3% to $83.10, Hess has dropped 1.1% to $74.02, Continental Resources has gained 1.4% to $44.39, and Whiting Petroleum has risen 1.1% to $34.93.