Recently created as an acquisitive independent, Halcon Resources took a big step forward Wednesday with plans for a $1 billion acquisition of rival E&P company GeoResources in a deal that sent shares of both Houston-based companies soaring.
GeoResources rose 19% to close at $36.52 on the Nasdaq as RBC analysts Scott Hanold calculated the Halcon offer represented a 23% premium from the previous close with its offer of $20/share in cash plus 1.932 shares of Halcon for each share of GeoResources (See story, 1734 GMT).
"We do not expect a competing offer because the assets are not too unique and the price paid was fairly full," noted Hanold in a brief report on the deal.
That close for GeoResources compared with a 52-week low of $14.56 and eclipsed the previous high of $35.97 achieved last month.
At the same time, shares of Halcon closed up 9% at $10.13, compared with a 52-week low of $1.80 and a high of $13.35.
Halcon was created February 8 through the recapitalization of RAM Energy Resources with a $550 million investment by a team led by new CEO Floyd Wilson, who formerly served as the chief executive at E&P Petrohawk Energy before its purchase last year by Australia's BHP Billiton.
When the deal closes in the third quarter, Wilson said it will "create a resource powerhouse with exposure to some of the most prolific unconventional liquids plays in the US."
With assets in the Williston Basin, South Texas and the Louisiana Gulf Coast, GeoResources became publicly traded in 2007.
The combined companies will have 52.8 million oil-equivalent barrels of proved reserves and 11,100 boe/d of production in the fourth quarter with 69% of the reserves in oil and liquids.
During a conference call to discuss the deal, Halcon executives said they expect to sell some other non-core assets this year to accommodate the acquisition and allow more focus on the key liquids-rich shale assets in the combined company.
For last year, GeoResources reported March 13 a 43% increase in adjusted net income from 2010 to $34.9 million as revenues rose 29% to $138 million on a 4% increase in production to about 5,200 boe/d.
In releasing those results last month, GeoResources CEO Frank Lodzinski attributed the gains to increased activity in the Bakken and Eagle Ford shale areas.
Announcing the acquisition by Halcon on Wednesday, Lodzinski said: "We are excited about the opportunity to partner with a company that is well positioned to become a leading liquids-focused resource player."
In contrast with its larger acquisition target, Halcon's assets averaged production of 4,121 boe/d in 2011 with $104 million in oil and gas sales and proved reserves of 21.1 million boe.
The deal will boost Halcon's proved reserves by 150% and production by 170%.
