Noble Corp plc (NE): Fir Tree Partners Starts Reducing Exposure

Fir Tree Partners, founded by Jeffrey Tannenbaum, is reducing its exposure to Noble Corp plc (NYSE:NE). Fir Tree’s latest filing with the Securities and Exchange Commission showed that the fund decreased its stake in the company to 15.29 million ordinary shares (including call options to purchase 8 million ordinary shares). On September 3, we reported that the fund held 24.5 million shares (included call options to purchase 9.434 million ordinary Shares). In this way, Fir Tree currently owns 6% of all common shares (including options) of Noble Corp plc (NYSE:NE) as an activist investor.

Jeffrey Tannenbaum

As our track record shows, Fir Tree initiated a position in Noble Corp plc (NYSE:NE) during first quarter of 2013 by purchasing over 4.64 million shares, it increased its holding in the subsequent quarters. On October 2 & 3, the fund bought 200,000 shares at an average price of $20.8 and between October 13 and 18, the fund sold 7.98 million shares at an average price of $18.76 million. According to its filing, the fund spent approximately $233,614,000 (including brokerage commissions) to acquire shares it currently owns. The stock of Noble Corp plc (NYSE:NE) is down by almost 40% in the last three months amid a decline in the oil price.

Fir Tree is a New York-based hedge fund that was founded in 1994 by Jeffrey Tannenbaum. It primarily invests globally in public and private companies, real estate and sovereign debt. The fund manages an equity portfolio of over $9 billion. The fund was recently issued 1.25 million shares by CIG Wireless Corp (OTCBB:CIGW). Other major holdings of the fund include Hertz Global Holdings Inc. (NYSE:HTZ), down by almost 10% since last year, and Equinix Inc (NASDAQ:EQIX), up over 20% year on year.

Noble Corp plc (NYSE:NE) is a $5 billion market cap, offshore drilling contractor for the oil and gas industry. In August the company announced that it has divested its entire stake in Paragon Offshore PLC (NYSE:PGN). For the second-quarter ending June 30, 2014, the company declared revenues of $1.2 billion and EPS of $0.91, compared to revenue of $1 billion and EPS of $0.69 for the same period last year. The company currently trades at a P/E of 5.36, compared to the industry average P/E is 13.23.

Most analysts maintain a ‘Hold’ rating on the stock with an average price target of $26.03. On October 2, ING Group downgraded Noble Corp to Hold and on October 15, ISI Group initiated a coverage on the stock with a ‘Buy’ rating. Nevertheless, with the oil prices expected to fall further, we might see investors cutting or even dumping their positions in oil stocks. As an example, a couple of days ago, Barry Rosenstein‘s JANA Partners sold out its position in QEP Resources Inc (NYSE:QEP), previously holding over 7% of the company.

The fall in prices comes amid a significant reduction in the oil demand. Even though for the next year, economists still expect an increase in oil demand, it is still relatively small compared to previous guidance.

John Overdeck and David Siegel’s Two Sigma Advisors and Ryan Heslop and Ariel Warszawski’s Firefly Value Partners are two hedge funds that are bullish on the stock and during the second quarter of 2014, increased their stake by 11% to 1.4 million shares and by 14% to 19.25 million shares, respectively.

Big investors such as hedge funds generally commit a lot of time and money to research their investments, which is something that smaller investors simply can’t afford. This is why following the moves of large investors can help retail investors with some ideas and, as research shows, this can help to beat the market by a significant margin. In this way, taking note of Fir Tree reducing its exposure to Noble Corp should definitely raise some questions regarding the company and the oil & gas industry in general.

Disclosure: None