April 6, 2018 Read More →

Activist Shareholders ‘Try to Wake Up’ Underperforming Oil and Gas Sector

Wall Street Journal:

A private-equity firm with a large stake in Houston explorer Carrizo Oil & Gas Inc. is calling on the company to sell assets or combine with a rival, the latest sign that activist investors are focusing more on the energy sector.

Kimmeridge Energy Management Co. has built up an 8.1% stake in Carrizo, according to a securities filing. The firm previously disclosed that it owned 4.9%.

The New York investment firm said in the filing that it wants Carrizo to sell its south Texas drilling fields and use the proceeds to pay down debt, buy back stock or invest more in its prolific fields in the state’s western desert.

The firm also said it wants Carrizo to explore the possibility of merging with rivals in west Texas.

Kimmeridge’s interest in Carrizo is indicative of broader attention that activist investors are paying to the energy sector. Though U.S. oil prices are trading around their highest level in more than three years, energy stocks have been left behind.

Energy was the only sector in the S&P 500 to decline in 2017, and this year energy shares are down 4.9%, compared with a 0.4% loss in the broader index.

Smaller energy companies have fared even worse. Shares of those in the S&P 600 index, which includes Carrizo and similarly sized oil-and-gas producers, have declined 22% over the past year, compared with a 15% gain for the broader index of smaller companies.

Several smaller companies that restructured their balance sheets during the oil-price slump now face demands from the hedge funds that emerged as top shareholders in bankruptcy proceedings.

Well-known activists have taken aim at larger companies as well. In recent months, Energen Corp., EQT Corp. and Hess Corp. have each made concessions to activist investors to stave off proxy fights.

More ($): Activist Investors Try to Wake Up a Slumbering Energy Sector

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