This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Deal: Activist Investors Target Oil Industry

NEW YORK ( TheDeal) -- Oil and gas has long been a primary object of scorn from environmental activists angered by Exxon Mobil (XOM - Get Report)'s Valdez oil spill in Prince William Sound in 1989 and more recently with BP (BP)'s Deepwater Horizon explosion in the Gulf of Mexico in 2010.

However, activists of a different sort -- that is, activist investors -- have increasingly tried over the past year to force change at several oil and gas companies. Targets have included Occidental Petroleum (OXY - Get Report) Nabors Industries (NBR - Get Report), Chesapeake Energy (CHK - Get Report), Transocean (RIG - Get Report), Hess (HES - Get Report), CVR (CVI - Get Report) and SandRidge Energy (SD).

The latest is Houston's Oil States International (OIS - Get Report). The activist has been Barry Rosenstein's Jana Partners LLC, which holds a 9% stake in Oil States, and is urging the company to spin off its lodging business into a separate company or a real estate investment trust, better known as a REIT.

Speculation has heightened that Swiss-based Weatherford International Ltd. may be next after missing earnings targets for the past three quarters. Another potential target is Oklahoma City-based Devon Energy (DVN - Get Report), which is attempting to raise cash by putting its gas gathering and processing assets into a master limited partnership.

What's the reason for all this attention from activist investors?

Simmons & Co. International analyst Bill Herbert wrote in a recent report that "full-throttled aggression" by shareholder activists is due to the largely uninspired results for energy companies, and the "ongoing intransigence" of the industry to more sensibly allocate capital and improve corporate governance.

"What is interesting, however, is the degree to which activists have been emboldened and are now pursuing agendas with previously unassailable management teams," the report said, noting the Oil States case. "Prior exemplary track records are not deterrents if the perception is that managements are being unresponsive to seemingly legitimate shareholder agendas."

New Orleans-based Global Hunter Securities LLC said activists are urging not only asset changes for capital needs or better focus to wholescale management changes. The call for replacing top executives extents from the general cause of increasing shareholder value to anger with overpaid managers, entrenched boards and old-fashioned mismanagement.

"We believe other underperformers, APA [<b>Apache</b> <span class=" TICKERFLAT">(<a href="/quote/APA.html">APA</a> - <a href=";ticker=APA">Get Report</a><a class=" arrow" href="/quote/APA.html"><span class=" tickerChange" id="story_APA"></span></a>)</span>] a chief example, are pre-emptively looking to shed some noncore assets and even buy back shares to stave off potential activism," the firm said.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
SD $0.00 0.00%
APA $54.20 -0.37%
CHK $6.59 -4.10%
CVI $23.72 -2.30%
DVN $34.56 -0.35%


Chart of I:DJI
DOW 17,891.16 +117.52 0.66%
S&P 500 2,081.43 +16.13 0.78%
NASDAQ 4,817.5940 +42.2360 0.88%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs