Jana Partners LLC, the activist shareholder that has agitated for changes in four energy companies since 2011, said “numerous partners” are interested in a “strategic transaction” that would result in the breakup of oil and natural gas producer QEP Resources Inc.
The company’s board should form an independent committee to evaluate a complete separation of its gas gathering and processing business, Barry Rosenstein, a managing partner at New York-based Jana, said in a letter to the company today. A stand-alone company would attract better management and have more opportunities to pursue acquisitions, he said.
Should the board fail to establish the committee, “it will be held personally responsible by shareholders for its failure to put a check on a clearly conflicted CEO and management team who appear intent on depriving shareholders of QEP’s full value potential,” Rosenstein said in the letter.
Activist shareholders from Rosenstein to Carl Icahn have pushed for changes at energy companies they believe have failed to realize the value of reserves. Icahn announced Oct. 7 that he had taken a 6 percent stake in Canadian oil and gas producer Talisman Energy Inc. Jana owns 7.6 percent of QEP, according to the letter.
QEP Chairman and Chief Executive Officer Charles Stanley is blocking a separation of QEP’s midstream assets, which are used to process and ship gas from the wellhead to the market, Rosenstein said. Potential investors in such a stand-alone company are hesitant to deal with Stanley “given his apparent reluctance to pursue a full separation,” Rosenstein said.
The fight between Jana and QEP is largely focused on control over the midstream business, which investors value at a premium to QEP’s drilling activity, Andrew Coleman, an analyst at Raymond James & Associates Inc. in Houston, said in a telephone interview today.
“At this point in time, folks want to see more distinct entities,” said Coleman, who rates QEP the equivalent of a buy and doesn’t own shares. Investors in recent years have rewarded companies that pursued breakup strategies allowing different units to stand alone, he said.
QEP is the worst performer among peer energy producers on the Standard & Poor’s 500 Oil & Gas Exploration and Production Index this year, according to data compiled by Bloomberg. The shares rose 1.4 percent to $32.51 at the close in New York.
Greg Benson, a spokesman for Denver-based QEP, didn’t return a call and e-mail seeking comment.