Hercules acquires Todco for $2.3 billion
Early gains across the broad market and merger news in oil services lifted oil and gas stocks Monday, offsetting the impact of weaker commodity prices tugging at the sector.
In early action, the Amex Oil Index ($XOI : 1,151.27, +16.04, +1.4% ) was ahead 0.7%, the Amex Natural Gas Index ($XNG :455.89, +6.67, +1.5% ) moved up 0.7%, and the Philadelphia Oil Service Index ($OSX : 208.73, +5.95, +2.9% ) gained 1.6%. A strong start to the week in Asian and European equities markets coaxed morning gains in U.S. stocks.
In the merger arena, drilling-rig company Hercules Offshore Inc. (HERO : 24.32, -2.25, -8.5% ) announced it would acquire Todco (THE : 38.65, +5.87, +17.9% ) in a $2.3 billion deal, handing Todco stockholders 0.979 of a share of Hercules Offshore and $16 in cash for each of their Todco common shares.
The deal, which consolidates shallow-water drilling assets in the Gulf of Mexico, sent Hercules shares as much as 8% lower, hitting a 52-week low, while Todco shares surged 17% to 38.48.
Otherwise, there was little support to be found for the sector in the underlying commodities market. April crude-oil futures fell below $57 a barrel on the New York Mercantile Exchange, adding to a 5% retreat for the contract last week, and the April natural-gas contract was down nearly 9 cents per million British thermal units at $6.84. See Futures Movers.
Pressure on energy prices was partly blamed on China's decision to raise interest rates, a move energy traders said could dampen the country's appetite for oil. China's booming industrial sector has been a major driver behind growth in global oil demand over recent years.
In the oil group, Chevron Corp. (CVX :69.65, +1.57, +2.3% ) was leading among the percentage gainers, up 1.3% at $68.97. The San Ramon, Calif., company announced over the weekend that its Bibiyana gas field in Bangladesh has started up, with initial output targeted at 200 million cubic feet a day, rising to 500 million a day by 2010. MarketWatch
