October 22, 2018 Read More →

Investors push for consolidation in shale oil and gas sector

Wall Street Journal ($):

A private-equity firm is urging oil producer Resolute Energy Corp. to merge with a rival, the latest salvo in a growing campaign by some investors to force shale drillers to consolidate.

Kimmeridge Energy Management Co. told Resolute’s board of directors in a letter Friday that it was stepping up call for changes at the company, saying Resolute had failed to follow through on a strategic review to explore a merger or potential asset sale announced in May after investor pressure.

New York-based Kimmeridge said in the letter that it may seek to install new board members at Resolute, which is focused on the Permian Basin in West Texas and New Mexico, if it doesn’t heed the firm’s suggestions. Kimmeridge, which has about $1.2 billion under management, owns nearly 10% of Resolute’s shares, according to S&P Capital IQ.

Resolute’s shares are down around 9% for the year, while oil and gas companies are collectively up nearly 6%. U.S. oil prices have surged by almost 20% in that time. The failure of most shale companies to rise with the rally in crude prices has frustrated investors and put pressure on company leaders.

The activist campaign is the latest to hit the shale oil and gas industry, a sector many investors believe needs to consolidate to generate profits.

“Consolidation is long overdue,” said Todd Heltman, a senior analyst with Neuberger Berman Group, which has more than $300 billion in assets under management. “It makes sense operationally and financially, but often there aren’t enough incentives for management teams to do it.”

More ($): Frustrated investors want frackers to consolidate

Comments are closed.