BEXP Brigham Exploration (MM)

Norwegian oil giant Statoil ASA (STO) has stuck a deal to acquire Brigham Exploration Company (BEXP) for $4.4 billion in cash. The acquisition allows Statoil to beef up its position in Williston Basin.

Per the tender offer, slated to begin on October 31, Statoil will acquire Brigham for $36.50 per share, representing a 36% premium over the average trading price of the latter for the last 30 days. The board of Brigham has collectively approved the transaction, which awaits shareholder approval. The deal is scheduled to close by the end of the year or in early 2012.

Based in Austin, Texas, Brigham is an independent exploration, development and production company that employs advanced exploration, drilling and completion technologies to systematically explore, develop and produce domestic onshore oil and natural gas reserves.

The acquisition will give Statoil control over the considerable oil reserves across the Bakken and Three Forks oil plays in the Williston Basin in North Dakota and Montana.

The Norwegian giant will have the access to more than 375,000 net acres in the Williston Basin as well as interests in 40,000 acres in other areas. Additionally, Statoil is expected to get hold of about 430 miles of oil, natural gas and water transportation systems located centrally in the Williston Basin.

The company said that the acreages comprising onshore fields, which depends mainly on practices like hydraulic fracturing or “fracking” to extract the resource, have the potential to boost capacity to 60,000–100,000 barrels a day from the current equity production of 21,000 barrels a day over the next five years. Upon closure, the company plans to ramp up rigs from 12 to 16 in the coming years and add two rigs in the first quarter of 2012. The risked resource base is projected between 300 million and 500 million barrels of oil equivalent.

We believe this latest acquisition will aid Statoil not only in getting hold of the Williston Basin, but also in developing these world class assets. The company intends to continue with Brigham's good neighbor program and engage local authorities and communities in the Williston Basin area with over 100 Brigham employees in Austin and North Dakota.

With the growing importance of U.S. unconventional plays for energy needs, the deal enables Statoil to take a leading role in the emerging onshore oil and gas industry alongside rivals like ConocoPhillips (COP) and ExxonMobil Corporation (XOM). According to industry experts, total U.S. oil production from shale plays is currently estimated at 700,000 barrels per day that could rise to up to 2 million barrels per day in the coming five to seven years.

Statoil holds a Zacks #2 Rank, which is equivalent to a short-term Buy rating. Longer-term, we are maintaining our Neutral recommendation for the company.

 
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