China Wants to Buy This Company
After a summer of volatile market swings and day-long drubbings in the market, Fools contend that now is a great time to buy great companies on the cheap. They are not the only ones using this logic; giant Chinese energy companies are doing the same thing. The question is, which company will get snapped up next?
Energy on the cheap
Earlier this week, China Petroleum (NYSE: SNP) , affectionately known as Sinopec, snapped up Canada's Daylight Energy for $2.1 billion. Though Sinopec essentially paid double Daylight's stock price at the time, it purchased the company at the lowest EBITDA multiple this year: 9.43. All other deals this year came at a minimum of 13.5.
This is a great deal for Sinopec, but the company is not finished. Its chairman has gone on record stating that Sinopec is still looking for opportunities to acquire oil and gas companies.
Energy will be in demand as populations explode and standard of living continues to rise in developing countries. Specifically, analysts are eyeing the demand for liquefied natural gas and pointing at Canada for potential buyouts. LNG is the export of the future, and Canada's planned Kitimat facility will be a big part of that. The joint venture between Apache (NYSE: APA) , EOG Resources (NYSE: EOG) , and Encana (NYSE: ECA) is expected to come online in 2015.
Progress Energy (NYSE: PGN)
At 900,000 acres, Progress Energy is the No. 1 leaseholder in the Montney basin, one of two Canadian natural-gas plays that will feed the Kitimat facility. Through the first six months of this year, average daily production of natural gas was 209,202 Mcf per day. Its current EBITDA multiple is about 9.38. As of the end of the second quarter, Progress hadn't touched its $650 million credit line, and its debt-to-capitalization ratio was 13%, appealing numbers for a potential buyer.
Pengrowth Energy (NYSE: PGH)
Pengrowth also holds land in the Montney basin, and the Horn River basin, which sits just north of there. Through the second quarter, the company produced 213,342 Mcf per day. This spring, Pengrowth announced it was increasing its capital expenditures for the year by $150 million to $550 million, a 54% increase over last year. Most of that will be focused on oil and lucrative natural-gas liquids. Its current EBITDA multiple is 7.37.
Talisman Energy (NYSE: TLM)
Talisman Energy has operations in Canada, but also in Australia, a prominent LNG exporter. The company has lowered its production guidance twice in the past two months, and last quarter its value dropped 35%. That said, analysts expect production to climb significantly in 2012, by as much as 80%. Its current EBITDA multiple is a very low 4.06.
Newfield Exploration (NYSE: NFX)
Newfield Exploration is based out of Texas, doesn't have operations in Canada, and focuses mainly on oil, so why is it on my list? The company controls 400,000 acres offshore China. With two offices in China and one more in Malaysia, the company has a solid international presence, but is also a top producer in Montana's Bakken oil field. Newfield's trading 34% less than its current share price, with an EBITDA multiple of 5.87, making it an enticing deal.
The demand for natural gas is soaring in Asia, and some analysts predict that Asian companies may spend $150 billion on buyouts to secure their energy needs. To be sure, there is no way to know for certain which company will be snapped up next, but you can bet that we will see more than a few energy mergers and acquisitions in the next year.