One victim of sliding oil prices is Seagull Energy (SGO), an independent international oil-and-gas explorer and producer. Its stock, up as high as 27 in October, is down to 16. But that's just dandy for financier Carl Icahn, who is rumored to be methodically snapping up shares: Whispers are he has accumulated some 1 million.
Icahn's interest in Seagull had been talked about even before he made known his intention in early March to rescue Pan Am from bankruptcy. He has since abandoned that plan. But not his appetite for Seagull, according to an Icahn associate. Icahn has filed with the government his intention to acquire at least a 15% stake in Seagull. That prompted the company to revise its poison pill to enable Seagull shareholders to buy shares at half the price of the stock once any investor acquires a 10% stake.
But Icahn is not daunted by any poison pill, says the associate. "Seagull needs to be acquired by another group and then restructured to enhance shareholder value," he says. He notes that management owns only a negligible number of shares. "There are many ways to skin a poison pill, and Carl is an expert at them," he adds.
This pro believes that Seagull has been approached by another group for a friendly deal, but he says that management turned it down. At its current price, "there's no risk involved" in buying in, he says, with the stock trading at just four times its cash flow and selling for just half the value of its total assets. He thinks that Seagull is worth 23 at current oil prices. But if prices rebound, it's worth 30, he adds. Seagull explores for and produces oil and gas mainly in the U.S., Egypt, Indonesia, and Tatarstan, a member of the Russian federation. Revenues were $549 million in 1997. Seagull is expected to earn 50 cents a share this year and 59 cents in 1999, down from 1997's 77 cents.
Seagull Chairman and Chief Executive Barry J. Galt says that Icahn has not communicated with the company. He declined comment on whether Seagull has been approached by another group. Icahn didn't return calls.