Outlines need for public E&P sector consolidation and impediments to dealmaking
Argues for publicizing unsolicited offers to overcome misalignment between shareholders and management
NEW YORK and DENVER, July 20, 2023 - Kimmeridge, a private investment firm focused on the energy sector, today published a white paper entitled, "I Still Haven't Found What I'm Looking For."
The paper builds on prior research from Kimmeridge, which has contributed to the evolution of the E&P sector. Unfortunately, despite meaningful progress in reforming the business model, the sector continues to suffer from a supply and demand imbalance. There are too many public companies relative to the degree of investor interest, resulting in depressed valuations. And, while shale was once a game for smaller, more nimble companies, the benefits of scale have emerged over the years. The logical outcome should be that large companies acquire small companies or that small companies combine. Nevertheless, public consolidation has yet to meaningfully occur. While disheartening, Kimmeridge is not surprised. As the firm emphasized in its 2021 white paper, "US Upstream M&A: Like Turkeys Voting for Christmas," the primary impediments to consolidation remain management and board incentives.
Mark Viviano, Head of Public Equities at Kimmeridge, said, "The highly fragmented E&P sector must prioritize public consolidation that is in the best interests of shareholders. Such consolidation would go a long way towards aligning interests, enhancing scale, delivering lower carbon intensity energy and increasing profitability. It seems like a logical proposition for everyone – except entrenched boards and management teams."
The current report outlines a framework for increasing the probability of a successful deal and illustrates how these principles can be applied in practice by referencing several recent transactions in the sector. Ultimately, given the lack of progress in addressing alignment issues between investors and boards, Kimmeridge also makes the case for publicizing unsolicited offers as the most direct way to hold an entrenched board or management team accountable.
To view more of Kimmeridge's research and thought leadership, please visit:
http://kimmeridge.com/research-archive/.
About Kimmeridge
Founded in 2012 by Ben Dell, Dr. Neil McMahon and Henry Makansi, Kimmeridge is an alternative asset manager focused on making direct investments in energy in the US. The Firm is differentiated by its direct investment approach, deep technical knowledge, active portfolio management and proprietary research and data gathering. For additional information on Kimmeridge and its proprietary research, please visit www.kimmeridge.com.
Media:
Daniel Yunger / Hallie Wolff / Emma Cloyd
Kekst-Kimmeridge@kekstcnc.com
917.574.8582 / 917.842.1127
SOURCE Kimmeridge Energy
