With a pending merge of two oil and gas companies - Statoil (STO) and Norsk Hydro (NHY), Zacks senior energy analyst Sheraz Mian is taking a 'wait & see' approach on the companies' stocks. Here's why:
'The proposed merger of Norsk Hydro's oil and gas business with Statoil, expected to close next month, will result in the creation of a Norwegian oil and gas champion to be named StatoilHydro ASA. The remaining Norsk Hydro will be a pure-play aluminum operator.
'The new company will be owned 32.7% by Norsk Hydro shareholders and 67.3% by Statoil shareholders. The Norwegian state will have an approximately 62.5% stake in the new combined company, which will be a formidable offshore player, with 6.3 billion BOE [barrels of oil equivalent] in reserves and production of around 1.9 million BOE/d [BOE per day] in 2007. The deal has already received regulatory and shareholder approvals.
'While we do not expect any operational changes till the proposed merger with Statoil is closed, we expect the ADR [American Depositary Receipt] prices to closely track Statoil ADRs going forward. The ADRs responded to the merger announcement by a more than 20% jump, highlighting the market's confidence in the value of the transaction. We expect the transaction to complete as proposed. Our Hold recommendation remains unchanged.'
Read the full analyst report on STO
Read the full analyst report on NHY
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