Positive Mention in Barron's Fails to Boost St. Mary (SM) and Quicksilver (KWK) as Oil Slides

Despite a positive article in Barron's this weekend, shares of St. Mary Land & Exploration (NYSE: SM) and Quicksilver Resources (NYSE: KWK) are down amid crude oil that is down more than $6. St. Mary's most recently traded at $40.47, down $1.75, or about 4.2% from yesterday's close, while Quicksilver most recently traded at $23.46, down 3% on the day.

The article highlights reasons why both St. Mary's and Quicksilver could be great takeover targets for hungry integrated or E&P companies. Specifically, Barron's believes the two companies prices do not reflect the value of their shale assets, which are becoming more valuable as shale is now being regarded as one of the most promising new sources of energy. From a more macro standpoint, the article also points out that "the number of U.S. energy deals looks to be on the rise, with a Q2 rebound, to 37..."

Citing one market player, the article proposes that shares of St. Mary's could be worth $75: using recent transaction prices on St. Mary's existing assets, with a crude price of $80 and natural gas price of $8, the valuation places shares at almost double its current price. Barron's argues that St. Mary's looks cheap given its enterprise value of 4.9x EBITDA, which suggests a material discount to its peer group which trades at about 7x EBITDA.

Barron's notes that shares of Quicksilver trade at a quite different valuation: its EV/EBITDA multiple is currently about 12.7x. On the other hand, Quicksilver is expected to growth earnings at about 41% in 2009, which compares to St. Mary's expected production growth of only about 12%.

St. Mary Land & Exploration Company and its subsidiaries engage in the exploration, exploitation, development, acquisition, and production of natural gas and crude oil in the United States.

Quicksilver Resources, Inc., an independent energy company, engages in the acquisition, exploitation, exploration, development, production, and sale of natural gas, natural gas liquids (NGLs), and crude oil in North America. It also involves in marketing, processing, and transmission of natural gas.

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