The merger and acquisition deals are coming in the shale patch, at a rate almost too fast to document. Last week news broke about Devon Energy, (NYSE:DVN), and Canadian-based producer, Enerplus, (NYSE:ERF) opening merger talks. Enerplus has some choice acreage in the Bakken play that would be very attractive to Devon as it fills in a lot of gaps in its own prime Bakken acreage. They also hold some non-operated acreage in the Marcellus, that would likely be sold off as Devon has no other operation in that basin. The Bakken is home to some of the longest shale laterals, and the ERF “jigsaw puzzle” pieces would assist DVN greatly in maximizing the production from the play.
Details are sketchy at this point, and I wouldn't be surprised if ERF isn't holding out for a cash premium given the liquids-rich “dirt”- 68%, they own. That would be the smart play for their shareholders. DVN has reached for its checkbook in its last couple of deals, for RimRock, and Validus. The stocks of both companies are off from peaks set in Q-3 of last year, DVN about 30% and ERF about 15%. This is the time to be merging with companies that can contribute immediately to the bottom line, and synergistically make Newco potentially a better entity than the two were separately. That’s what’s supposed to happen anyway.