Energen Corporation (EGN): Activist Takes Large Stake, Pushes For Sale

Tracts of land in the Permian Basin in West Texas and New Mexico, one of the most lucrative oil plays in the U.S, have been the object of desire at the center of multiple M&A deals recently, with Marathon Oil Corporation (NYSE:MRO) making two acquisitions in March for a total of 91,000 acres at a cost of $1.8 billion. That comes after a 2016 year in which as much as $26 billion in deals took place in the region, which has transformed it into a sellers market with scant few parcels of land on the market.

However, Energen Corporation (NYSE:EGN) Chairman and CEO Jim McManus may be hesitant to sell at what may be perceived as a low point, believing his company is poised for a breakout year, echoing Meister’s thoughts during the company’s first-quarter conference call by stating that “[…] it’s all about execution right now”.

Energen’s production rose by 5% year-over-year to 52.8 MBOED in the first-quarter, with Mr. McManus stating that the performance of the company’s wells which were completed with its generation 3 frac design were very encouraging.

“For those Gen 3 wells with at least 75 days of production history, cumulative production by formation is outperforming the type curves associated with the highest potential EURs we have identified” he said. Energen anticipates calendar year 2017 production of 66.3 MBOED.

Drexel Hamilton analyst Robert Christensen stated in February that the company’s 2017 guidance was conservative given those generation 3 frac designs, and raised his price target on the stock to $81 from $71 at that time, which is 43% above the stock’s current price.

Disclosure: None