Takeover Bait In The North Sea

After months of trailing the Dow, major oil producers have started to show some life. Small-to-midsize oil and gas stocks, however, have yet to catch up. Money manager Alan Gaines, president of Gaines Berland, a New York investment firm that focuses on energy, thinks they are the ones to bet on.

Frank Bracken of Southcoast Capital in New Orleans favors Ranger Oil (RGO), a Big Board-listed oil-and-gas company with operations in the North Sea, the Gulf of Mexico, and Western Canada. About 65% of its liquid production comes from the North Sea, while 78% of its natural gas emanates from Western Canada. It also has interests in Angola, Namibia, Ecuador, and Peru.

One New York money manager cites Ranger Oil's comparative lack of debt and strong cash flow as reasons for its investment appeal. One other attractive feature: He thinks Ranger Oil is a takeover target.

Ranger's North Sea properties make it attractive bait for the majors exploring for crude in that part of the world, he says. "Ranger has been an operator in the North Sea for a quarter-century," he notes. It has drilled 100 wells and still runs more than 25. Few independents remain in the North Sea, and this "makes Ranger Oil a likely acquisition target for the bigger guys," says this pro, who puts the company's worth at 8 to 10 a share. He believes suitors include ARCO, British Petroleum, and Total Petroleum.

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