September 10, 2012
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of oil and gas producer Plains Exploration & Production (NYSE: PXP ) fell 10% today after announcing asset acquisitions.
So what: The company announced it is buying $5.5 billion worth of assets in the Gulf of Mexico from BP (NYSE: BP ) and paying $560 million to Royal Dutch Shell for a stake in an oil field. The company doesn't plan to issue shares to pay for the purchases and will fund them through debt.
Now what: Investors aren't excited about the increased leverage on the balance sheet and that's why the stock is down today. Long-term debt was already at $3.9 billion at the end of June; this will only increase the debt load. It's a risky bet and that would be enough to keep me out of the stock, even after the 10% discount.
Interested in more info on Plains Exploration & Production? Add it to your watchlist by clicking here.
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