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Allen's blog

Anadarko Buying Kerr-McGee and Western Gas

This morning Anadarko Petroleum announced it was buying Kerr-McGee for $16 billion in cash and Western Gas Resources for $4.74 billion in cash and the assumption of $560 million in debt. The $21 billion in deals will be financed with a one-year loan and eventually by asset sales and new equity and debt.

The prices being paid represent a 40% premium per share for Kerr-McGee and 49% over the closing price for Western Gas. These are healthy premiums, but according to one analyst on CNBC, the price per barrel of reserves being acquired is only about $12, which is consistent with, or possibly below, current finding and development costs in the industry. =>Continue Reading

Kinder Morgan MBO

The Kinder Morgan MBO may be one of the most significant events in the energy market. Rich Kinder is, in my opinion, one of the smartest energy players. The fact that he is taking his company private at this point may signal a unique view of the energy market.

If one looks at the two most recent deals done by Kinder Morgan - the Terrasen deal and the Rocky Mountain Express pipeline - signify Kinder's view of the new future base for crude oil and natural gas. The Terrasen deal is the pipeline that is bringing oil down to the US and possibly the West Coast for export to China from the oil sands in Canada. This is a high cost oil, and Kinder may be saying that crude oil prices will remain at a level sufficient to keep this output economic. =>Continue Reading

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