bloggingbuyouts

According to (subscription required) the Wall Street Journal, a wave of consolidation in the oil industry could be in the cards given high crude prices that show few signs of letting up.

The Journal reports that, "Private-equity firms, for instance, see the promise of profitable investments. State-owned oil companies from booming China and India are more willing to make big outlays for the assets they crave. Oil companies from producing countries are flush with cash and looking to expand. The big international companies are adjusting their portfolios to focus on their most profitable assets and to buy the advanced technology they need to keep an edge amid growing competition. And small and midsize oil concerns are more likely to pair up to survive."

The interest of private equity is a strong indication that the sector is undervalued. Generally, private equity firms aren't interested in speculating on future commodity prices, so they must think the stocks are undervalued based on current fundamentals.

For most investors, betting on individual oil and gas companies is too risky. If you agree with the notion that a wave of consolidation in the industry is likely to drive prices up, you may want to look at the S&P Oil & Gas Exploration & Production SPDR (AMEX: XOP). With an expense ratio of just 0.35%, it's an inexpensive way to profit from a bull market there.

Delta Petroleum Corp. (NASDAQ: DPTR) has announced that Kirk Kerkorian's Tracinda Corp. has completed the due diligence process for its strategic investment in Delta. Tracinda has now waived its due diligence condition and it will now proceed with its planned investment into Delta Petroleum.

Tracinda previously agreed to purchase 36 million shares of Delta Petroleum's common stock for $684 million. This generates roughly a $19.00 per share investment, while shares closed out yesterday with a $20.79 level and the 52-week trading range is $13.06 to $24.94. Its market cap based on yesterday's close is $1.38 billion.

Earlier this week, DP gave an update on its reserves and production guidance, so Kerkorian must still be in the camp that this is a win-win. The company has a special meeting of shareholders on February 19, 2008 to vote on this investment.

Jon Ogg is an editor and partner of 247WallSt.com.

MGM Mirage(NYSE:MGM) is recently up $1.78 to $87.38. Dubai World, a holding company for the Persian Gulf state, announced on 8/22/07 it will pay $2.7 billion to acquire a stake in MGM City Center, a 76-acre Las Vegas development. Dubai World will also buy 14 million shares from MGM for $84 a share and 14 million from investors. Unconfirmed chatter is circulating Dubai World will raise its tender bid.

Penn National Gaming(NYSEPENN), a diversified, multi-jurisdictional owner and operator of gaming properties, agreed to be acquired on 6/15/07 by certain funds managed by affiliates of Fortress Investment(NYSE:FIG) and Centerbridge Partners for $67 dollars a share. The deal is expected to close in mid-2008. PENN is recently trading at $58.26.

Daily M&A Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

Biogen(NYSE:BIIB) volatility Flat as BIIB rallies to 28-month high as Icahn gets OK. BIIB is recently up $1.99 to $61.87. www.DowJones.com reported Carl Icahn has received clearance from the FTC to enter transactions regarding BIIB. Icahn reported owning 2.74 million shares of BIIB as of 6/30. BIIB call option volume of 9,483 contracts compares to put volume of 5,296 contracts. BIIB September option implied volatility of 32 is above its 26-week average of 28 according to Track Data, suggesting larger risk.

Nabors(NYSE;NBR) call volume heavy on unconfirmed takeover chatter. NBR, an owner & operator of almost 600 land drilling, approximately 791 land workover/well-servicing rigs and 43 offshore platform rigs worldwide, is recently up $1.15 to $30.87 on unconfirmed & renewed takeover chatter. NBR has a market cap of $8.2 billion. WTI Crude Futures are up 1.27% to $70.72 according to Bloomberg. NBR call option volume of 9,935 contracts compares to put volume of 777 contracts. NBR September option implied volatility of 34 is above its 26-week average of 31 according to Track Data, suggesting larger fluctuations.

Dillard:(NYSE:DDS) September volatility increases to 70 on asset sale chatter. DDS is recently up $1.7 9 to $26.21 on renewed & unconfirmed asset sale chatter. Barington Capital reported a 3.7% position in DDS on 8/3. Barington has requested a meeting with DDS management on how to improve DDS's profitability. Viking Global disclosed a 5.1% position on 7/13. William Dillard is Chairman of the Board owns approximately 24.4% of the outstanding voting shares of DDS. William Dillard the 2nd is the CEO. Alex Dillard is President. Mike Dillard is executive Vice President. DDS is expected to report EPS in the next three weeks. DDS September option implied volatility of 70 is above its 26-week average of 40 according to Track Data, indicating larger risks.

Daily M&A Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

InterOil Corp. (NYSE: IOC) -- volatility Elevated as IOC rallies on Picken's BP Capital position. IOC, a Canadian oil exploratory company with operations in eastern Papua Basin, New Guinea, is recently up $7.35 to $35.50. BP Capital, Boone Picken's Fund, disclosed a 9.9% stake in IOC. IOC call option volume of 7,888 contracts compares to put volume of 5,759 contracts. IOC August straddle is at $7.20. IOC September call implied volatility is at 120, puts are at 131, above its 26-week average of 95 according to Track Data, indicating larger price fluctuations.

Gannett inc. (NYSE: GCI) -- volatility Elevated as GCI trades at 10-year low. GCI is recently down 1 cent to $47.97. Wachovia says, "valuation is not compelling given we don't see near-term improvement in newspaper fundamentals." GCI September option implied volatility of 27 is above its 26-week average of 21 according to Track Data, suggesting larger risk.

Tenet Healthcare Corp. (NYSE: THC) -- implied volatility Elevated as THC near record low. THC, an operator of 71 hospitals, is recently up 23 cents to $4.63. Stanford Group lowered its price target to $3 on 8/8. Stanford says, "we believe it is unlikely that THC has the financial capacity needed to turn its operations around." THC November option implied volatility of 70 is above its 26-week average of 44 according to Track Data, suggesting larger risk.

Daily M&A Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.