August 7, 2019 / 12:05 PM / 14 days ago

Oil producer QEP ends sale process, settles with activist Elliott

(Reuters) - QEP Resources (QEP.N) will remain an independent oil and gas producer after ending a half-year process to sell itself without a deal, the company said on Wednesday, deciding instead to work with a rebuffed suitor to identify further cost savings.

At the start of the year, Paul Singer’s $38 billion hedge fund Elliott Management Corp, which owns 4.9% of QEP, offered $2.07 billion for the Denver-based company, saying it was undervalued despite having good acreage in the Permian Basin, the largest U.S. shale oilfield.

Despite running a sale process aimed at soliciting other bids for the company, QEP said Wednesday it had concluded “the best path to create superior value for our shareholders is to move forward as an independent company.”

Instead, QEP and Elliott have agreed to work together to identify two new QEP board members and create a five-person committee chaired by Chief Executive Tim Cutt to implement best practices and boost efficiency. The committee will include two current independent directors and the two new board members.

Elliott had been in talks with QEP’s board until very recently about buying the company, but they could not agree on a valuation, according to sources familiar with the matter.

QEP is now worth half of what Elliott offered in January.

The hedge fund still believes QEP and its assets are undervalued and could return with a new proposal, one of the sources said.

QEP shares edged higher despite widespread declines in the sector following a 5% drop in WTI crude prices on Wednesday. [O/R]

The gains were supported by QEP saying on Wednesday that it would reinstate its quarterly dividend of 2 cents per share. It cut its 2019 spending projection by about $50 million, and raised its 2019 production forecast to between 29.9 million barrels of oil equivalent (boe) and 31 million boe, from 28.5 million boe and 30.3 million boe.

U.S. energy mergers and acquisitions have been tepid in 2019 as shareholders have pressured oil and gas companies to cut costs and return cash to them instead of expanding during a period of wild swings in crude and equity prices.

As well as reducing planned capital expenditure this year, QEP said it had slashed its general and administrative expenses by 50% compared with the first quarter.

The S&P Oil & Gas Exploration & Production index slipped on Tuesday below the level in February 2016, the trough of the last oil price slump.

Reporting by David French in New York, Svea Herbst-Bayliss in Boston, and Arundhati Sarkar in Bengaluru; Editing by Sriraj Kalluvila and Richard Chang

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