Best take from the COG | XEC Deal Call:
Q: “What was the single biggest driver of the deal for XEC?”
A: “It makes us a better company”
@NextWaveEFT: ‘Nailed it’ (sarcasm)
CHANGE OF CONTROL.
Merger arbitrage usually refers to an investment strategy - whereby - an investor simultaneously purchases the stock of merging companies, *exploiting* market *inefficiencies* before a merger.
In the absence of a reasonable explanation for the Cimarex | Cabot merger, investors & analysts are voicing that the tables have been turned.
The merger appears to trigger change of control clauses.
And management appears to be using *the merger to exploit an executive compensation inefficiency*:
“Ryan Lance at COP had notoriously massive change of control of like $120MM at one point. They changed it, but at a glance he would get 2-3x his comp of around $30MM. So (COG) Mr. Dinges $40MM is... modest?” - Paul Sankey
In support of this argument is a history of alleged misalignment of incentives at Cimarex:
Since 2014, there have been 160 insider transactions at Cimarex:
152/160 were sales
Total sold: $85.2MM
Total bought: $570K - @EnergyCynic
The great thing about public transactions is that the market’s vote is transparent.
*Both* COG & XEC traded down ~7%, on a day when almost all other E&Ps were up -
DEMAND.
China’s oil demand has already reached pre-pandemic levels
US mobility recovered to 16% below pre-pandemic levels
Goldman sees oil hitting $80/bbl
Oil demand appears to be recovering faster than excess supply (Iran, etc.) is hitting the market.
We could go with more details, but - TBH - S&P put together an infographic that visualizes the story better than we can tell it.
Check out the infographic here -
OTHER NEWS.
Japan & others push back on IEA report
White House EO on climate
Bids come in for Shell refinery
Shell sells separate refinery to Pemex
That’s it for this week - we’re betting on Chelsea & ManU - catch y’all next Tuesday -