Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Buy Loews, Sail High

Loews (NYSE: LTR  ) is a holding company with a long track record of digging up value in beaten-down sectors. The company's late-'80s and early-'90s distress purchases of a rig fleet that we know today as Diamond Offshore Drilling (NYSE: DO  ) demonstrate its savvy in the energy sector. Yesterday's announcement of a significant investment in onshore natural gas assets is another intriguing move.

Loews is taking roughly $4 billion worth of Dominion Resources' (NYSE: D  ) gas assets off of the utility company's hands, while XTO Energy (NYSE: XTO  ) is buying a separate basket of properties for $2.5 billion. Loews is picking up relatively low-risk properties, predominantly in western Texas, but also in Michigan and Alabama, for roughly $1.64 per thousand cubic feet of gas equivalent. Let's get some context to see just how cheap that is.

XTO investors don't seem to mind paying roughly $2.50/mcfe, which is somewhat high relative to recent mergers and acquisitions activity in the space. The company's shares hit a record high in response to the news. Looking at the present valuations of gas players like Cimarex Energy (NYSE: XEC  ) , Newfield Exploration (NYSE: NFX  ) , and EOG Resources (NYSE: EOG  ) in terms of proven reserves, $2.50/mcfe falls into the lower end of that range.

Back at Loews, CEO Jim Tisch commented that even if gas prices stay flat in the future, the company would "do very well" with its investment. However, many Fools foresee a much more bullish supply/demand picture for natural gas. Their votes for the winner of this year's Stock Madness tournament partly attest to that view. It's one I personally subscribe to, as well. For that reason, I think Loews will be able to sail high on this particular investment.

Related Foolishness:

Fool contributor Toby Shute doesn't own shares in any company mentioned. Cimarex is an Inside Value recommendation. The Motley Fool's disclosure policy is unassailable.

Read/Post Comments (0) | Recommend This Article (24)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 529092, ~/Articles/ArticleHandler.aspx, 10/24/2016 6:27:18 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,223.03 77.32 0.43%
S&P 500 2,151.33 10.17 0.47%
NASD 5,309.83 52.43 1.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/24/2016 4:01 PM
D $73.12 Up +0.28 +0.38%
Dominion Resources CAPS Rating: ***
DO $17.16 Down -0.24 -1.38%
Diamond Offshore D… CAPS Rating: **
EOG $93.62 Down -0.26 -0.28%
EOG Resources CAPS Rating: ****
NFX $43.13 Down -0.10 -0.23%
Newfield Explorati… CAPS Rating: ***
XEC $135.72 Down -1.43 -1.04%
Cimarex Energy CAPS Rating: **
XTO.DL $41.81 Down +0.00 +0.00%
XTO Energy, Inc. CAPS Rating: *****