Welcome to the Energy and Capital Weekend Edition — our insights from the week in investing and links to our most-read Energy and Capital and sister publication articles.
In light of $110 oil, abundant natural gas, improving cleantech, and growing regulations, the energy industry is undergoing a round of mergers and acquisitions.
Since December of last year, there have been about a dozen announced tie-ups valued at billions of dollars and spanning industries from oil to solar to utilities.
Established companies are looking to secure future profits by purchasing new technologies and smaller companies…
And smaller companies are all too eager to sell if the price is right.
As spring marches into your backyard, here’s a lighthearted take on the current situation in the form of a song that’s perennially stuck in my head, “Reproduction” from Grease 2.
To the Tune of “Reproduction”
The energy industry is so constructed that every so often it undergoes consolidation.
If not, then a valuable technology can create the same situation.
Yes, any company that deals with electrons, write it on the list.
I’ll try to make this crystal-clear:
The search for higher profits turns this sector into a circus of debauchery.
Now you see just why VCs give untold millions to unproven start-ups.
And why utilities then buy the best ones should be cleared up!
We call this quest for satisfaction a what, class?
The need for vertical integration!
Hey, I’m lost, where are we?
Quarter two, month one…
Acquisition, acquisition!
Put your excess funds to work.
Acquisition, acquisition!
Make share prices go berserk.
Acquisition!
You may not even know what a buyout is…
So I’ve got your explanation right here…
Where does the money go?
For example, in this complex market system the bigger companies
are always looking to get a piece of the downstream action.
It could be a cash or all-stock purchase.
Are there any questions before we get into it?
Is it possible SunPower’s solar success
Could’ve been on Total’s radar and never even knew it?
When a blue-chip with all kinds of cash
Starts buying other firms, do you think that others will do it?
I think absolutely, cause they want more market share
to boost their value on Wall Street.
With the shares moving fast, you’ll want to stake out your position… now!
Yeah, cause all the talking heads are saying “buy, buy, buy, buy, buy, buy, buy, buy, buy!”
Acquisition, acquisition!
Give me all your assets now.
Acquisition, acquisition!
It seems that’s all they think about.
Acquisition!
Come on show me how high that valuation can go!
Ohhh, I think my stock’s gonna go up!
Where does the money go?
The big utilities and oil majors are the only ones that can really afford billion-dollar deals.
Any comments on this?
Hey Exelon, is it true that companies like you, you know, mature and all,
Carry some extra cash around for buyout occasions?
Of course they do. Then when the time is right for an offer
They call up the board and make a bid for the, uh, what do you call it, Constellation.
Oh, that’s how it works! Yeah, and what will the analysts say if it turns out like Time Warner/AOL, huh?
Yeah, Yeah, Yeah!
Acquisition, acquisition!
The Duke/Progress deal’s been done.
Acquisition, acquisition!
For DPL it wasn’t fun!
Acquisition!
See what happens when deregulation
Causes lower premiums?
Acquisition, acquisition!
Acquisition, acquisition!
Acquisition, acquisition!
Acquisition!
Where does the money go?
This week’s more serious market commentary below.
Call it like you see it,
Nick Hodge
Editor, Energy and Capital
2011’s Best Energy Play: CNN Calls Them “Instant Millionaires”
Publisher Brian Hicks explains how ordinary Americans are cashing in on the payday of their lives, thanks to a previously untouchable reserve containing 23 years’ worth of domestic energy.
It’s All about the Batteries: Why They’ll Keeping Going and Going and Going…
One man recently unveiled to the world the technology that will allow us to completely rethink renewable energy. PiperJaffray estimates there will be upwards of $600 billion spent on this technology over the next 10-12 years. Get in on this energy company now — before they’re front-page news and their share price through the roof.
Cash for Trash: Best Market Since 1998?
Best Market since 1998? Ridiculous, but Adam Lass is not complaining while it’s still paying off in triple digits…
Bin Laden Hates This Car: $4 Gas and Truck Stop Hookers
Editor Jeff Siegel discusses a $4.45 billion electric car opportunity.
Trailer Park Investor: This Time, It’s Different
The roof just blew off. Hail the size of beach balls is pounding the house, breaking off drywall, and frankly, getting in the way of my research… The rain is running in like the North Shore at Oahu and there is an electric shock every time I touch the shift key.
The Marcellus Shale: A Bright Spot in U.S. Energy: Are You in the Next Recession-Resistant Region?
Editor Ian Cooper takes a look at the economic impact the Marcellus shale is already having on the East Coast, and offers one of the best ways to trade it.
Emerging Natural Gas Stocks: Are You Still Living in a Pipe Dream?
Editor Keith Kohl explains why natural gas is one of the answers to reducing our foreign oil addiction.
Silver to Soar as the Gold to Silver Ratio Stabilizes: 4,500-year-old Ratio Shows Silver Will Catch Up to Gold
Despite the recent swell in prices, silver should continue increasing — doubling within the next few weeks and vaulting the price of the white metal over $100 an ounce.
China Set to Pass U.S. as Global Leader: The Day The Communists Won
Well that’s it… It’s been a good run, but after 235 years of dominant reign, the U.S. is being forced into global superpower retirement. Maybe we’ll at least get a nice watch for our service.
Gold Has No Value: There’s Money to be Made
There is no reason for gold… It holds no intrinsic value, despite what the pundits would tell you. The whole industry is one of futility.
Canada’s Peak Natural Gas Crisis: Feeling the Pinch from Peak Natural Gas
Editor Keith Kohl takes a hard look at why Canada’s natural gas crisis is already underway, and what implications investors can expect from the decline.
The Housing Market’s Silver Lining: Why I’m Bullish on Apartment REITs
Editor Steve Christ peers into the dark corners of the housing market and finds the silver lining in it all.
