Cimarex | Cabot
A merger arb, of sorts
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.
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 -
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.
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 -