4 Legitimate Energy Takeover Targets For 2012

Posted by Gordon Wilcox of Bezinga.com

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If 2011 is going to go down as the year of the risk-off trade, and it very likely will, then it’s no surprise that high beta energy stocks and the relevant ETFs that hold them have struggled. Year-to-date, the Energy Select Sector SPDR (NYSE: XLE [FREE Stock Trend Analysis]) is slightly negative while the Market Vectors Coal ETF (NYSE: KOL) has plunged more than 30%.

The interesting thing about the declines in energy stocks, particularly the mid- and small-cap varietals, is that now depressed valuations could spur a fresh round of deal-making in the energy patch in 2012. It’s kind of flying under the radar, but there was decent sized coal deal announced Monday.

Plus, there has been talk of some oil majors possibly looking to make a bigger deal for a for a U.K. exploration firm.

A recent report by PwC says M&A activity related to U.S. shale plays will remain robust next year and another report by BDO USA said oil and gas CFOs are confident about their access to capital heading into the new year, meaning we could see plenty of energy sector M&A next year.

With that, let’s look at some viable takeover targets across the energy sector.