Natural resource companies are in a predicament, particularly the larger cap constituents. After years of underinvestment, today's surging demand is challenging company's ability to quickly add additional supply. One upshot of this situation has been higher prices across a wide spectrum off commodities including oil. Another is the pick up in industry consolidation as access to resources to exploit becomes more of a challenge.

".. on the basis of the average price over the three months prior (to the initial offer), Eni is offering a premium of over 50 percent."

It was often said back in the 1970's when oil prices were skyrocketing, that it was easier and less risky to drill for oil on Wall Street. The reference is of course to companies' ability to top up reserves through acquisition.

In the case of Burren Energy (LSE, BUR), this cliche has turned into reality. In our last review of Burren back in October, Italian oil major Eni SpA was in the process of re-grouping after an initial offer of 1050p was turned away. At the time, we were confident the group would not be deterred and in time return with another offer.

In late November, we were not disappointed. Eni and Burren announced agreement on an all cash offer of 1230p per share. Although the price is short of our 1300p estimate, it represents a 17 percent improvement on the first attempt and vindicates management's decision to hold out for more.

In reality the premium is even greater. Based on Burren's share price the day before the initial indicative offer of 1050p, this new proposal represents an uplift of just over a third. While on the basis of the average price over the three months prior, Eni is offering a premium of over 50 percent.

Long-term holders of Burren that have been on the register since the company's initial public offering in December 2003 will have seen their investment grow by 9.5 times. Quite an accomplishment for management.

As such, Burren's board has concluded the offer is 'fair and reasonable' and has unanimously approved it.

Eni have at the same time gained the irrevocable acceptances for the offer from shareholders representing nearly 21 percent of Burren's share capital. Given these levels of acceptance, the premium and the board's approval, we believe there is a high degree of certainty that this offer will be successful.

Shares in Burren, however, are currently trading modestly higher than the 1230p offer. What explains this?

In our opinion, the market is still factoring in another approach by a third party. While we believe this is a possibility (the Korea National Oil Corp admitted on 22 October that it was looking at the company), a combination between Eni and Burren offers the most in synergies.

With the ability to extract the most value from a deal, Eni's offer is in our view sufficiently high to keep other bidders at bay.

As a quick reminder, Eni and Burren are partners in the Congo where the Italian operates the M'Boundi field. This field is one of two primary centres of production for Burren. Eni is also able to consolidate exploration acreage in the country. As such, the removal of duplicate functions should result in cost savings whilst a cleaner structure will enhance decision making. All very beneficial from the perspective of Eni.

Burren's second centre of production is in Turkmenistan. Here, Eni would acquire a fast growing, high quality operation in a country that appears to be opening up more to foreign firms. With vast resources still untapped, Eni is adeptly gaining a solid foothold in a promising region.

Exploration and development in both countries is ongoing as well as in the Middle East and India (through Burren's 27 percent stake in Hindustan Oil Exploration Company).

In all, we believe the standalone prospects were very promising for Burren. However, Eni's offer has brought forward some of this value today.

This is demonstrated on the charts where the share price is currently sitting at new all time highs. With the share price currently around 1243p, Burren is 27 percent above our initial entry price of 977.5p from May 2006.

Given the unlikelihood of an additional takeover offer, we believe now is an opportune time to lock in profits above the takeover offer price. Accordingly, ^Fat Prophets recommends selling Burren Energy around 1243p^.