Is Oil States International becoming a trendy activist investment?
Maybe, if Alexander Roepers’s latest move is any indication. The New York hedge fund manager and founder of New York–based Atlantic Investment Management is the latest activist investor to discover the company...sort of. Roepers actually owned the stock as far back as 2007 and 2008, and he reestablished his latest position in late 2012, but he kept a low profile while other activists made public pronouncements about the company.
But on Tuesday, Atlantic became at least the third activist investor to make a big move on the company in less than two years. And two of these hedge funds became activists in the company they had urged Oil States to spin off.
In a 13D filing Tuesday, Atlantic, which is known for its Cambrian Fund, uses activist boilerplate jargon, stressing that it bought the stock for investment purposes and plans to regularly evaluate its performance in the future, blah, blah, blah. Atlantic also says it has spoken with management and the board and others with interests in the company, but “has no present plans or proposals.” Otherwise, there is no indication where or how Roepers plans to unlock value in the energy services company.
You may recall that in late April 2013, Barry Rosenstein’s New York–based Jana Partners filed a 13D on Oil States, an energy services company. . One week later, at the annual Sohn Investment Conference in New York, Greenlight Capital’s David Einhorn lamented that his presentation on Oil States had been scooped by Rosenstein, sounding like the student who says during a class presentation, “I was going to do what the kid before me did.”
Whatever the case, in just a few weeks, the stock surged more than 40 percent.By the end of July of that year, Oil States announced plans to spin off its accommodations unit, now called Civeo Corp.
One month later it announced it would sell Sooner, its tubular services business, for $600 million. It also boosted its share repurchase program from $200 million to $500 million. On May 30 of this year, Oil States completed its spin-off of Civeo.
By the time the stock peaked in late June 2014, it had surged about 60 percent from its April 2013 low. Not bad for a 14-month move.
In the second quarter of 2014, Jana unloaded about 57 percent of its stake and sold the remaining shares in the third quarter. However, it held on to its Civeo shares.
New York–based Greenlight, however, mostly maintained its investment for the past year.
Jana and Greenlight then focused their attention on Civeo. On September 29, the stock plunged about 50 percent in one day when Civeo abandoned plans to convert to a real estate investment trust (REIT) and also said it would redomicile in Canada. The stock fell another 10 percent the following day.
Greenlight, which actually was systematically selling a large number of Civeo shares from August 13 through September 26, abruptly changed course. From September 30 through October 9, Greenlight bought several million shares at their new, marked-down price, lifting its stake to 9.9 percent of the stock.
In a regulatory filing, Greenlight called on Civeo to replace CEO Bradley Dodson. It also urged the company to aggressively return capital to shareholders “through a well-communicated dividend policy” and add debt “to make its capital structure more appropriate for a real estate company.”
On October 23, Civeo and Jana, which owns 11 percent of the stock, announced a deal under which the company would add three new independent directors. Civeo’s board also agreed to create a so-called value creation committee to review ways to boost the stock’s value. It also “announced its commitment to emphasize yield as the core component” of the company’s value plan, including a high payout ratio and the return of a “substantial majority” of the company’s after-tax free cash flow.
Now Roepers has Oil States all to himself. His renewed interest seems to have been sparked by the stock’s 12 percent decline in the past two days on no apparent news, prompting Roepers to scoop up 400,000 shares below $48 per share. He now owns more than 2.7 million shares, or 5.1 percent of the total outstanding.
It will be interesting to see where Roepers thinks the company can boost value. Of course, a sharp rebound in oil prices would probably be the best remedy.
