According to a recent article on The Street, Jim Cramer's crystal ball is seeing two energy companies as prime takeover candidates in the year ahead. Cramer named Pioneer Natural Resources (NYSE: PXD ) and EOG Resources (NYSE: EOG ) as potential buyout candidates in 2014. Let's take a closer look at both companies and see what makes either appealing targets for a buyer as well as how realistic a deal might be in the year ahead.
Biggest oil field outside of Saudi Arabia?
Pioneer Natural Resources believes its acreage in Texas sits above the world's second biggest oil field. Because of that the company could potentially recover 7 billion barrels of oil and gas. That's a lot of upside for a company that currently has proven oil and gas reserves totaling 1.1 billion. Because of this massive resource position, Cramer thinks Pioneer might attract the attention of a larger oil and gas company looking for a foothold in this major oil field.
In buying Pioneer, a potential acquirer would pick up a company that is already the second largest oil producer in Texas. Not only that; it would gain a company that has the potential to do so much more as it begins to develop the 900,000 acres it has in the Sprayberry/Wolfcamp portions of Texas' Permian Basin. Cramer is right, the company holds a very attractive position in what could be a major development area, which is why Pioneer would be an attractive takeout candidate.
The only problem is that an acquirer would need to fork over more than $25 billion to buy Pioneer Natural Resources. That could prove to be a bit rich for some buyers, which is why another name to keep any eye on is Concho Resources (NYSE: CXO ) . It's a pure play on the Permian Basin and at just $10 billion it's not quite as big a bite as Pioneer Natural Resources. Concho has a solid position in the play and recently accelerated its drilling program in order to double its production by 2016. I like it more than Pioneer as a takeover candidate to watch in 2014.
The other big energy name on Jim Cramer's list of energy takeover candidates is EOG Resources. He's already called it the best oil stock in America. However, what he sees as a catalyst is the pending retirement of Executive Chairman Mark Papa. In July of this year Papa turned over the CEO reins to William Thomas. Before retiring as CEO, he did an incredible job leading the company for over 13 years.
It's entirely possible that with Papa out that EOG Resources could be put up for sale. However, with a nearly-$44 billion market capitalization, EOG Resources would be a huge acquisition for even the biggest of big oil companies. That said, there is a lot to like about EOG as it is the top producer in the Eagle Ford Shale and it has solid positions in both the Bakken and Permian Basin. These make it a great company to buy in order to access all of the top oil basins fueling America's oil boom.
However, a multi-billion dollar oil takeover of that scale doesn't happen very often. A more palpable deal would be for a company like Newfield Exploration (NYSE: NFX ) , which would only set a would-be buyer back by about $3.5 billion. Newfield, like EOG Resources has positions in the Eagle Ford and Bakken, and while it lacks the Permian Basin, it does have positions in the Uinta Basin and an emerging play in Oklahoma. So while EOG is certainly a very appealing takeover candidate, a deal for a smaller multi-basin player like Newfield Exploration is much more likely to happen than a massive deal for EOG Resources.
None of this is to say that either EOG Resources or Pioneer Natural Resources are not good companies to buy. Both have vast oil-rich resource positions that should reward investors for years to come. In fact, because of this, investors actually would be short changed if either company was bought out before these resources are fully developed.
Learn more about EOG Resources
EOG Resources is fueling record oil and natural gas production that is revolutionizing the United States' energy position. Its position in the three biggest tight oil plays could revolutionize your portfolio as well. That's why we selected it as one of our top stocks for America's energy boom. To learn more about EOG Resources and our other two top stock, check our special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free.