Why EPL Oil & Gas Inc. Shares Popped Today

Is this meaningful or just another movement?

Mar 12, 2014 at 4:00PM

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 EPL Oil & Gas (NYSE:EPL) jumped 30% today after the company agreed to be bought out.

So what: Energy XXI (NASDAQ:EXXI) offered $1.53 billion to buy EPL in a deal that would create the biggest publicly owned independent on the Gulf of Mexico shelf. Shareholders are being offered $39 per share in cash or 1.669 shares of Energy XXI per share of EPL, as well as a mix of cash and stock.  

Now what: The pop today is more than a dollar less than the cash offer, which is consistent with the risk shareholders take in buying shares and holding to get $39 in cash in the future. There's a little upside in hanging on and there's always the possibility the price is increased, but investors are taking a risk if they hang onto shares now and the deal collapses. I'd cash out and move to the next opportunity, because the premium investors have gotten today is too good to pass up.

What to do now?
If you're looking for something to do with your new EPL cash, imagine a company that rents a very specific and valuable piece of machinery for $41,000... per hour (that's almost as much as the average American makes in a year!). And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report reveals the company we're calling OPEC's Worst Nightmare. Just click HERE to uncover the name of this industry-leading stock... and join Buffett in his quest for a veritable LANDSLIDE of profits!

Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. 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.

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

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