I can't recall a time when a company has announced two large acquisitions at the same time. Today we hear that Anadarko Petroleum (APC) will buy both Kerr McGee (KMG) and Western Gas Resources (WGR) for more than $21 billion in cash. With Anadarko's market cap around $22 billion before the deals were announced, they are essentially doubling the size of the company overnight, creating the country's largest independent exploration and production company.

Both of these purchases show just how undervalued energy companies are in the public markets these days. Anadarko is paying a 40% premium for Kerr McGee ($16.4B) and a 49% premium for Western Gas ($4.7B). Despite these huge cash premiums, the deals will be accretive to earnings. Few seem to disagree that our natural gas needs will continue to rise, but for some reason the stocks trade at exceptionally low valuations. This has resulted in a lot of M&A activity, and likely will continue to do so.