LargeCap Stocks to Keep an Eye on Today

Shawshank, VA 10/17/2011 (PennyPayDay) – Kinder Morgan agreed to buy El Paso for $21.1 billion in a cash-and-stock deal.

The transaction, which values El Paso at $38 billion including El Paso's outstanding debt, creates the largest network of natural gas pipelines in the U.S. and is the largest energy merger this year.

El Paso shares were surging 27.1% to $24.90 in premarket trading Monday, while Kinder Morgan shares were rising 2.1% to $27.44.

Norway's Statoil agreed Monday to buy Brigham Exploration for $36.50 a share in cash.

The total equity value of the deal about $4.4 billion; the enterprise value is about $4.7 billion.

Brigham shares were soaring 19.7% to $36.33.

Anadarko Petroleum agreed to pay BP $4 billion to settle all claims from the Gulf of Mexico oil spill in April 2010.

Anadarko shares were adding 4.9% to $74 and BP shares were gaining 3.3% to $41.20.

Wells Fargo reported third-quarter profit of 72 cents a share, missing the Wall Street consensus target of 73 cents.

Shares were tumbling 3.1% to $25.85.

Citigroup reported third-quarter profit of $1.23 a share, beating the average analyst estimate of 81 cents.

Shares were rising 1.1% to $28.72.

Entertainment products company Hasbro reported third-quarter profit of $1.27 a share, below the average analyst expectation of $1.30.

Shares were falling 0.8% to $34.46.

Oil services company Halliburton reported third-quarter earnings of 94 cents a share, beating the average analyst estimate of 92 cents.

Shares were up 0.4% to $37.56.

Information technology company IBM is expected to report third-quarter earnings of $3.22 a share after the markets close, above earnings of $2.82 last year.

Shares were down 0.3% to $190.05.

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Kinder Morgan to Buy El Paso for $20.7 Billion

Tomahawk, WI 10/17/2011 (PennyPayDay) – Kinder Morgan (NYSE:KMP) plans to buy El Paso Corp. (NYSE:EP) in a $20.7 billion deal that's expected to create America's largest natural gas pipeline operator.

Kinder Morgan Inc. is expanding its reach as the U.S. becomes increasingly reliant on natural gas. Drillers are pumping ever-increasing amounts from underground shale deposits across the U.S. Natural gas prices have dropped to less than a third of their level of three years ago, and power companies are using more of the fuel because it emits fewer greenhouse gases than coal.

The deal also adds to founder and CEO Richard Kinder's energy empire. Kinder, 66, started the company with friend William Morgan after leaving his post as president of the now-defunct Enron Corp. Forbes lists his net worth at $6.4 billion.

Kinder Morgan will more than double the size of its pipeline network by purchasing El Paso. The new pipeline system would stretch 80,000 miles -- long enough to wind around the globe three times. Kinder Morgan's pipelines in the Rocky Mountains, the Midwest and Texas will be woven together with El Paso's expansive network that spreads east from the Gulf Coast to New England, and to the west through New Mexico, Arizona, Nevada and California.

"We believe that natural gas is going to play an increasingly integral role in North America," Kinder, who is also the company's chairman, said on Sunday when the deal was announced.

Robert McFadden, a Houston-based natural gas pipeline consultant, said the expanded network will make it easier to move natural gas from new shale fields that have mushroomed across the U.S. in the past few years.

"Think of it like federal highways and toll roads," McFadden said. "The more options you have to get from point A to B, the shorter your trip."

Pipeline companies, which get paid for moving natural gas from the field to the market, have been in big demand recently as drillers tap rich new deposits in Pennsylvania, Montana, Utah and other states. The pipeline companies have been able to keep transport fees roughly constant during the past several years, even though natural gas prices have dropped from more than $13 per 1,000 cubic feet in 2008 to less than $4 this year.

The acquisition comes on the heels of other consolidation in the industry. Energy Transfer Equity is planning to buy Southern Union Co. for $5.7 billion after a tug of war with Williams Cos.

With more pipelines under its control, Kinder Morgan could charge suppliers higher transport fees, and that may affect the price that utilities and other major natural gas buyers pay for natural gas. But home owners and other retail customers won't notice much of a change on their monthly bills, if any. Retail gas bills are largely influenced by local distribution costs and other items that won't change with this deal, McFadden said.

Kinder Morgan said it will also become the largest independent transporter of gasoline, diesel and other petroleum products if the deal is approved. It will also be the biggest independent owner and operator of petroleum storage terminals. It will be the largest transporter of carbon dioxide in the U.S., moving about 1.3 billion cubic feet per day.

Kinder Morgan and El Paso are both based in Houston. Kinder will remain chairman and CEO of the combined company.

The combined company will surpass other pipeline companies such as Enterprise Products Partners LP, also based in Houston. Enterprise operates about 50,200 miles of pipelines.

The companies valued the deal at $26.87 per El Paso share, which includes $14.65 in cash, 0.4187 in Kinder Morgan shares and 0.640 in Kinder Morgan warrants.

Based on El Paso's about 770.25 million outstanding shares, the deal is worth about $20.7 billion.

Kinder Morgan is also assuming $13 billion, net of cash, of El Paso debt as part of the deal. It intends to fund the purchase with a combination of equity and more debt. But once the deal closes, the company said it plans to sell off El Paso's exploration and production assets and the cash raised will help reduce that debt.

Kinder Morgan said the deal is expected to boost Kinder Morgan's shareholder value through increased cash flow and future growth opportunities. It's also expected to boost Kinder Morgan's dividends and result in about $350 million a year in cost savings.

El Paso had announced plans to spin off its exploration and production unit in May.

The acquisition, which has been approved by the boards of both companies, is expected to close in the second quarter of next year and needs regulatory approval.

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