Why Shares of Athlon Energy Inc Popped Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of independent oil and gas explorer Athlon Energy Inc jumped 14% today after the company announced an acquisition.

So what: Athlon is buying properties and undeveloped acreage in the northern Midland Basin for $873 million from five different parties. Net proved reserves based on initial estimates are just 31 MMBOE but management estimates there's reserve potential for 250 MMBOE. 

Now what: This is a sizable acquisition for Athlon and, while it's expected to be cash-flow and net-income positive immediately, it will also require new capital to be completed. Management said it will look to up borrowings from existing revolving credit lines, as well as raise new equity and debt. So, while this transaction should be a positive, it could come with some dilution in the near future.

Three stock picks to ride America's energy bonanza
Athlon isn't the only one riding the American energy boom. Record oil and natural gas production is revolutionizing the United States' energy position. Finding the right plays, while historic amounts of capital expenditures are flooding the industry, will pad your investment nest egg. For this reason, the Motley Fool is offering a look at three energy companies using a small IRS "loophole" to help line investor pockets. Learn this strategy, and the energy companies taking advantage, in our special report, "The IRS Is Daring You To Make This Energy Investment." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 

The article Why Shares of Athlon Energy Inc Popped Today originally appeared on Fool.com.

Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story