Hedge fund Corvex Management LP on May 31 reported a 5.5% stake in Energen Corp. (NYSE: EGN) and called for the possible sale of the oil and gas producer.
Energen's shares were up 3.1% at $57.38 in morning trading, giving it a market value of around $5.3 billion. The Birmingham, Ala.-based company has a large concentration of its assets in the Permian Basin.
The Permian, the largest U.S. oil patch, has become a hotbed of M&A activity in the energy industry as a recovery in oil prices spurs firms to make strategic investments.
Oil industry deals this year have centered on securing acreage in the Permian Basin due to its low production costs, key at a time when oil prices have recovered to around $50 per barrel (bbl), up from around $35/bbl in early 2016.
The hedge fund, which called Energen's shares "undervalued," has held discussions with the company, according to a regulatory filing on May 31. Corvex, a $5.5 billion hedge fund run by Carl Icahn protege Keith Meister, is urging the company to put itself up for sale.
"This flows from an opinion that EGN has strong assets that are underappreciated by the market because of operational missteps," said Don Bilson, head of event-driven research at Gordon Haskett.
When asked during a conference call last week about the company's shareholder base, Energen CEO Jim McManus said he expects the company to have a breakout year.
"So I think it's all about execution right now," he said on the first-quarter conference call. Corvex, in its quarterly filing of stock holdings earlier this month, disclosed a small Energen stake purchased in the first quarter. Hedge funds Elliott Management LP and Highfields also disclosed they purchased Energen shares in the first quarter.
Up to its close on May 30 of $55.62, Energen's shares had gained about 17% over the past year, valuing the company at about $5.5 billion. The S&P 500 Oil & Gas E&P index has gained about 24% over the same period.
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