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Why Beach Energy Ltd shares rocketed higher today

One of the biggest movers on the market on Monday has been the Beach Energy Ltd (ASX: BPT) share price.

At the time of writing the energy company’s shares are up 16% to 95.7 cents.

Why are its shares higher?

This morning Beach Energy announced the results of its 3 for 14 accelerated non-renounceable pro-rata entitlement offer of new shares related to the acquisition of Lattice Energy from Origin Energy Ltd (ASX: ORG).

According to the release, major shareholder Seven Group Holdings Ltd (ASX: SVW) strongly endorsed the acquisition by pre-committing to its full equity entitlement and also sub-underwriting the offer.

Thanks to Seven’s support and a successful institutional entitlement offer, the company raised approximately $201 million of the total $301 million to be raised. The remaining $100 million is to be raised by a retail entitlement offer that opens on Thursday.

The market appears to be pleased with the strong support for the acquisition which is expected to be transformational for the company, enhancing the growth, scale, and diversity of its operations.

It isn’t hard to see why. Should the acquisition close successfully, FY 2018 production guidance will increase circa 150% to 25‐27 MMboe.

Should you invest?

There’s no doubt that this acquisition is a game-changer for Beach Energy and should oil prices remain favourable, it could make it a great investment for those looking for exposure to the resources sector.

However, my preference in the oil and gas industry remains Santos Ltd (ASX: STO). Although it isn’t the bargain buy it was in July, I still see a lot of value in its shares if oil prices remain at current levels for the medium to long-term.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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