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QEP Resources' (QEP) Stock Spikes 16% Yesterday: Here's Why

Zacks Equity Research

QEP Resources, Inc.’s QEP shares rallied 16% to $7.11 on Jun 26, following reports that Elliot Management Corporation is in advanced talks to acquire the former. While there hasn’t been any formal confirmation from either party yet, the deal could be finalized within weeks, per Bloomberg.

Notably, QEP Resources received an acquisition proposal from shareholder Elliott Management Corp. earlier this year. Elliott expressed plans of taking over all outstanding shares of the upstream energy player for a consideration of $8.75 a share, which was at 44% premium to the stock’s closing price on Jan 4.

Last month, it was reported that Whiting Petroleum Corporation WLL, Callon Petroleum Company CPE and The Blackstone Group L.P. BX were also in the talks to acquire QEP Resources. However, Elliot seems to have an upper hand in this bidding race to take over the Denver-based upstream player.

Notably, after scrapping the deal to divest Williston assets amid falling commodity prices, QEP Resources has been exploring other strategic options like merging with other firms or selling off the company. With the divestment of gas-weighted assets in the Haynesville Shale, Uinta Basin and Pinedale Anticline, QEP Resources has pivoted from a multi-basin strategy to a become a more focused Permian operator. Elliott supports QEP Resources’ move to become a pure-play Permian firm but believes that its constructive efforts are yet to get reflected in the stock price.

QEP Resources has allocated about 80% of 2019 capital budget for this lucrative play. The Zacks Rank #3 (Hold) company’s daily equivalent production from this region in first-quarter 2019 increased 47% from the year-ago period to 4,082.3 thousand barrels.

For second-quarter 2019, QEP Resources expects total oil-equivalent production in the range of 6.8-7.2 million barrels of oil equivalent. Oil and condensate production is expected within 4.95-5.15 million barrels (MMBbls). While gas output is expected in the range of 5.4-5.8 billion cubic feet, NGLs production is estimated within 0.9-1.1 MMBbls. Capital outlay for the second quarter is anticipated in the band of $185-$205 million. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.    

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