The surprise $1.84 billion takeover offer for Aurora Oil & Gas Limited (ASX: AUT) by Baytex Energy Corp (NYSE: BTE) sent the share price up 56% on Friday, so people may want to know what else may arise from this.
Although the company’s board has recommended the offer for shareholder approval, it may not be over that quickly. Could Baytex’s move be just the first of other bids? Baytex offered a premium to Aurora’s Thursday share price of $2.62, which, by the way, was a new yearly low for the company the day before the takeover announcement.
It might attract the attention and action of other energy producers wanting to position themselves in the resource rich Eagle Ford shale oil region located in southern and central Texas in the USA.
Aurora’s joint venture with Marathon Oil Corporation (NYSE: MRO) covers about 19,100 acres in the liquid rich zones of the basin, the area that Baytex wants to enter.
Aurora’s three other joint ventures cover another 57,900 acres in the heart of the shale oil trend. Marathon Oil, a US$22.7 billion company, may even have run the ruler over Aurora at some point, so the takeover story may not be done yet.
Aurora’s share price was last up around $4.10 back in October 2012. What may have prompted the bid was that its share price was in the high $2 range when it announced last month that it expected a 47% increase in production for FY2014. If Baytex was going to move, it would be better when market expectations are low and before the anticipated production boost raised reported earnings. Keep watching this story for further activity.
BHP in Texas
Other Australian companies have operations in this area as well as the Permian Basin found in western Texas. BHP Billiton Limited (ASX: BHP), for example, has acreage in both the Permian and Eagle Ford regions. BHP expects its US shale oil business will become profitable by FY2016.
In November, its new JV partner for its Eagle Ford acreage, Devon Energy Corp (NYSE: DVN), said that it could possibly achieve a 20% better recovery rate for oil, which would bring down production costs.
The shale oil and unconventional gas industry has really taken off in the US. Australia has similar resource regions such as the Cooper, Otway, and Surat basins, meaning international attention has turned to Australia and its own energy riches.