Shares of Pennsylvania-based oil and gas explorer Penn Virginia Corp. PVA rallied Thursday on rumors that British energy supermajor BP plc BP could be interested in buying the company.
Penn Virginia shares were changing hands at $4.98, up 53 cents on the NYSE at the close yesterday, up almost 12% from Wednesday’s close. In fact, such was the volatility – with shares jumping as much as 20% at one point – that trading was briefly halted.
This was after U.K. financial news publication Proactive Investors said – citing unnamed sources close to the negotiations – London-headquartered BP is preparing to launch an offer for the Eagle Ford shale driller of about $8 per share.
The offer makes Penn Virginia worth about $573 million, marking an 80% premium over Wednesday’s closing price of $4.45. Penn Virginia and BP declined comment on the rumor.
However, it is thought that Penn Virginia has rejected the bid, on the grounds that the offer allegedly undervalued the company, which is worth at least $10 per share.
Similar to other independent exploration and production companies, the results of Penn Virginia are directly exposed to oil and gas prices. Continued weakness in commodity prices has significantly affected the company’s revenues, earnings and cash flows. This, in turn, has dragged down its share price by around 75% over the past 12 months – well below last June's price of $17.
It must be noted that the struggling explorer, carrying a Zacks Rank #3 (Hold), has been in news of late as a prospective buyout candidate. Moreover, billionaire investor George Soros – having about 8% stake in Penn Virginia – has called for efforts to explore a sale of the company.
Reports have surfaced that apart from BP, rivals such as Exxon Mobil Corp. XOM and Chevron Corp. CVX might also be interested in bidding for Penn Virginia.
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