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Kimmeridge Calls on Resolute Energy to Explore Sale of Company
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Kimmeridge Energy Management Co. has alerted Resolute Energy that the company needs to take action to bolster the value of the company, particularly "pursuing a sales process."
Kimmeridge owns nearly 10% of Resolute Energy, which it acquired in 2017.
In the letter, written by Kimmeridge Managing Partner Benjamin Dell, states: "In short, there are too many operators in the Permian, many with bloated cost structures, subscale assets and lingering underperformance (despite rising commodity prices). As you are well aware the development of shale resources is increasingly a manufacturing business, but this unconventional manufacturing business is one with hundreds of participants, many of which are subscale. These subscale unconventional companies have much in common: the promise of returns to investors that rarely materialize due to poor capital allocation, the futile pursuit of growth over returns, and the enrichment of the C-suite regardless of performance. Indeed, these are the very issues plaguing Resolute.
"We believe that for the reasons mentioned above, Resolute continues to trade at a steep discount to its relevant peers. In early 2018 it became clear that other significant shareholders shared this view, with Monarch Alternative Capital, VR Capital and Fir Tree Capital each independently filing Schedule 13D's encouraging the Company to pursue a sales process, a view that we wholeheartedly agree with."
This echoes what corporate raider Carl Icahn did with both SandRidge Energy and, more recently, Energen - who is now being acquired by Diamondback for $9.2 billion.
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