Saturday, November 7, 2009

Southern Star Energy Merges

In an odd sounding transaction, at least from my perspective, Southern Star Energy, a small player in the Haynesville Shale, is merging with two other companies, Lion Energy Corp. and Gold Star Resources, to form a single "mid-sized, well capitalized" company. Southern Star holds a 40% interest in 5,000 Haynesville Shale acres. The press release seemed to indicate that Lion will be the surviving entity.

It sounds like a strange deal to me because Southern Star is merging with two Canadian companies that have what sounds to be unproven oil and gas interests in Africa. Not to sound disparaging, but seeing as the combined price of a share of stock from all three companies is less than the "meter money" in my car's coin tray, the transaction seems to be one of those speculative penny stock deals.

Southern Star was one of the first companies to make noise about the Haynesville Shale in 2008, but big players quickly overshadowed it. I don't know the behind the scenes story here, but it seems to point to the need for gas producers in the shale extraction business to be large scale companies. I keep wondering if the smaller independents will be able to play in the "big leagues."

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