Activist Orange Capital Seeks Board Changes at Bellatrix

Activist investor Orange Capital LLC is seeking board changes and a possible sale of Bellatrix Exploration Ltd. (BXE) after taking a 5.3 percent stake in the Calgary oil and gas exploration company.

Orange Capital has been building its position in Bellatrix since July 2 and holds about 10.2 million shares, the New York-based investment firm said in a regulatory filing. That makes Orange Capital the company’s largest shareholder, slightly ahead of Fiera Capital Corp., which holds 5.2 percent, according to data compiled by Bloomberg.

Bellatrix rose 9.7 percent to C$8.68 at 1:37 p.m. in Toronto today, the most since June 27. The stock gained 1.3 percent this year through yesterday for a market value of C$1.5 billion. The Standard & Poor’s/TSX Energy Index, advanced 15 percent over that timeframe.

Orange Capital, run by Daniel Lewis, is seeking changes to Bellatrix’s 10-person board, including its size, age and constitution, and greater transparency for investors, the filings show. Orange Capital also wants the company to explore strategic alternatives including an initial public offering or sale of its midstream assets, or an outright sale of the company, the documents said.

Troy Winsor, a spokesman for Bellatrix, which is focused on light oil and liquids-rich natural gas opportunities in the Western Canada Sedimentary Basin, declined to comment on the matter.

Confidence Rattled

Bellatrix’s management has stumbled lately on a number of issues that has rattled investor confidence, said Jeremy McCrea, a Calgary-based analyst at Alta Corp. Capital Inc.

Earlier this year, the company surprised investors by saying it would use its credit facility to develop a gas-processing plant in the Willesden Green area of Alberta instead of enlisting the help a midstream partner to develop it, McCrea said.

Investor concerns were raised once again after management downsized a share sale to C$150 million ($137 million) from C$250 million earlier this year, McCrea said. The company eventually raised $172.6 million with an overallotment and was expected to use the proceeds on an acquisition. That never materialized and management has yet to say how the money will be used, he said.

“There’s a lack of confidence growing especially when there was no use of proceeds,” McCrea said.

Gas Prices

In addition, Bellatrix’s stock price has suffered along with other natural gas producers’ shares amid a surge in supply of the fuel. Natural gas traded on the New York Mercantile Exchange has averaged $3.90 per million British thermal units over the past five years, after reaching almost $14 in 2008.

The company plans to boost production by the end of the year to 48,000 barrels a day from an average of 41,000 barrels a day this year, with a 35 percent increase in the weighting of oil or natural-gas liquids, according to an Aug. 5 presentation on its website. The company has boosted production by 524 percent since the fourth quarter of 2009.

To contact the reporters on this story: Scott Deveau in Toronto at sdeveau2@bloomberg.net; Jeremy van Loon in Calgary at jvanloon@bloomberg.net

To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net Jacqueline Thorpe, Carlos Caminada

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