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The Zacks Analyst Blog Highlights: Spectra Energy, Enbridge, Apache, EOG Resources and Tesoro

Zacks Equity Research

For Immediate Release

Chicago, IL – September 14, 2016 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Spectra Energy Corp. (SE), Enbridge Inc. (ENB), Apache Corp. (APA), EOG Resources Inc. (EOG) and Tesoro Corp. ( TSO).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Tuesday’s Analyst Blog:

Oil & Gas Stock Roundup

It was a week where both oil and gas prices finished higher.

On the news front, pipeline giants Spectra Energy Corp. (SE) and Enbridge Inc. (ENB) agreed to merge in a stock-for-stock deal worth $28 billion, while energy explorer Apache Corp. (APA) announced a massive discovery in West Texas' Permian Basin.

Overall, it was a good week for the sector. West Texas Intermediate (WTI) crude futures added 3.2% to close at $45.88 per barrel, while natural gas prices edged up by a meagre 0.2% to $2.797 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: BP & CNPC Ink Shale Gas Deal, Diamond Offshore Loses Rig Contract Early .)

Oil prices moved north for the first time in 3 weeks after the U.S. Energy Department's weekly inventory release showed that crude stockpiles recorded a huge drop. As per the federal government’s EIA report, oil inventories decreased by a massive 14.51 million barrels for the week ending Sep 2, 2016 – largest in 17 years. The outsized drop resulted from a tumble in net imports as Tropical Storm Hermine moved into the Gulf of Mexico and prevented tankers from docking.

Oils-Energy Sector Price Index

Natural gas also eked out a small gain following a lower-than-expected build and predictions of strong cooling demand with forecasts of warmer temperature over the next few days.

Recap of the Week’s Most Important Stories

1. Leading midstream energy companies Spectra Energy Corp. and Enbridge Inc. have decided to merge in a $28 billion transaction with an aim to create the largest energy infrastructure company in North America. The deal will likely be closed by the first quarter of 2017. Post-merger, Enbridge shareholders will have a 57% ownership in the combined entity and Spectra Energy will have the remaining 43% interest.

The amalgamation will form one of the largest global energy infrastructure firms with the merger of the two companies’ highly complementary platforms. With a diverse base of assets that comprises crude, liquids and natural gas pipelines along with terminal and midstream operations, the merged entity will be able to reach key supply basins and markets.

The combined firm is also believed to have solid balance sheets and enough cash flow generating capacity to finance future growth projects. Moreover, the merger will combine two secured giant projects worth $20 billion and $37 billion that are under development. (Read more: Spectra Energy, Enbridge Enter into $28 Billion Merger Deal .)

2. U.S. energy explorer Apache Corp. reported that it has made a significant new discovery in the Alpine High, which is located in the southern portion of the Delaware Basin in western Texas. The find is expected to contain about three billion barrels of oil and 75 trillion cubic feet of rich gas.

The site - which cost Apache $1,300 per acre for 352,000 gross acres (307,000 contiguous net acres) is expected to generate anywhere from $8 billion to $80 billion in revenue for the company over the life of the wells.

To accelerate drilling in the discovery, Apache has raised its full-year 2016 capital budget by 11% to $2 billion. Per the company, the west Texas field has the potential to become one of the largest discoveries in a decade. (Read more: Apache Announces Discovery of New Oil Field in Texas .)

3. Oil and gas company EOG Resources Inc. (EOG) has agreed to acquire privately held Yates Petroleum Corp. in a $2.5 billion stock and cash deal. Over the years, Artesia, New Mexico-based Yates has gained a rich acreage position across the western U.S. - producing 29,600 barrels of oil equivalent per day (48% oil). EOG Resources currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .

EOG Resources, on the other hand, is the largest oil producer in the Lower 48, with average net daily production of 551 thousand barrels of crude oil equivalent. The company is reputed for technological leadership in the development of unconventional resource plays.

The combination of EOG Resources’ strong technical competencies with the massive resource potential of the Yates acreage is expected to create significant value for shareholders of both companies. In particular, EOG Resources' inventory of premium drilling locations will grow by 40% as Yates immediately adds an estimated 1,740 net premium drilling locations in the Delaware Basin and Powder River Basin. (Read more: EOG Resources to Combine with Yates; Deal Valued at $2.5B .)

4. San Antonio, TX-based refiner Tesoro Corp. (TSO) announced that it has decided to purchase the Madison, WI-based renewable fuels and chemical company, Virent. The deal – whose terms were not disclosed – is intended to support the latter in bringing biofuels technology to commercial scale.

Per the agreement, Tesoro will provide resources and expertise to Virent in order to help the company scale up and commercialize its BioForming technology for the production of low carbon bio-based fuels and chemicals.

Moreover, Tesoro expects the addition of Virent will help it to lower costs in compliance with the federal renewable fuel standard and California`s low carbon fuel standard. (Read more: Tesoro Agrees to Acquire Renewable Fuels Company Virent .)

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