US independent Halcon Resources has agreed to buy GeoResources for about $1 billion in cash and stock in a move aimed at boosting its holdings in the oil-rich Eagle Ford and Bakken plays.
Halcon will pay all GeoResources stockholders $20.00 in cash and 1.932 shares of Halcon Resources stock for each share owned. That equates to $37.97 per share based on Tuesday’s closing price of Halcon shares.
Floyd Wilson – Halcon’s chief executive who sold his former company, Petrohawk Energy, to BHP Billiton before taking on his new role last year – said the deal would be “immediately accretive to discretionary cash flow, production and reserves” for Halcon.
“The combination will create a resource powerhouse with exposure to some of the most prolific unconventional liquids plays in the United States,” Wilson said in a statement, adding that the deal will boost Halcon’s estimated proved reserves by more than 150% to about 52.8 million barrels of oil equivalent.
Halcon’s average daily production will also rise more than 170% to about 11,070 boe per day, Wilson said.
The deal is pending an okay from stockholders; the boards of both companies have unanimously approved the deal.
Investors and analysts were impressed with the deal. Halcon’s shares were up 9.46% and trading at $10.18 apiece at 12:48 pm on the New York Stock Exchange on Wednesday. GeoResources shares shot up 19.76% to $36.85 apiece on the news.
“Given Floyd Wilson’s track record of acquiring companies and generating substantial shareholder value, we believe the team at Halcon is a good fit for these assets,” Global Hunter Securities analyst Philip McPherson wrote in a note to clients on Wednesday.
In addition to the added Eagle Ford and Bakken acreage, Halcon will add about 200,000 acres in the Austin Chalk trend, which partially overlaps with the Woodbine play in Texas where Halcon already has assets.
Wilson said in a conference call on Wednesday that the company is "particularly excited" about the Austin Chalk acreage and will focus "dramatically" on developing the play.
"We hope (we) have found a hidden jewel n that property," he said on the call.
McPherson said the deal could increase investor interest for other players in the Woodbine such as Crimson Exploration and Zaza Energy. Shares in both those companies were up on Wednesday.
He also said the deal may trigger divestments in the Permian basin and in South Texas due to Halcon’s non-compete agreement with BHP.
The deal is expected to close in the third quarter.