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(Reuters) - Activist investor Orange Capital LLC said it would ask oil and gas company Bellatrix Exploration Ltd (BXE.TO) to consider strategic alternatives after it became the largest shareholder in the Canadian company.
Bellatrix's shares rose as much as 10 percent, valuing the company at $1.67 billion, after New York-based Orange Capital reported a 5.3 percent stake in the company on Tuesday.
The hedge fund also wants to discuss about the size and composition of Bellatrix board and a possible IPO or sale of the company's midstream assets, a regulatory filing showed on Tuesday. (1.usa.gov/1AuDFvP)
Orange Capital said Bellatrix's valuation was well below its intermediate industry peers in the Canadian exploration and production sector.
"The discount that they speak on would be on a cash flow multiple basis they're trading at discount to some other companies in their peer group," Clarus Securities analyst Daniel Choi said.
Bellatrix's shares have fallen about 11 percent in the past three months up to Monday's close, while the S&P TSX Oil & Gas Exploration & Production Index .GTSX10102020 has fallen only 0.5 percent.
The stock is trading about three times above its intrinsic value - a metric that takes into account analysts' growth estimates over the next 15 years, according to Thomson Reuters StarMine.
Bellatrix said earlier this month sales volume rose 64 percent to 36,342 barrels of oil equivalent per day (boed) in the second quarter. It expects average daily production of about 41,000 boed for the full year.
"I think (Bellatrix) would cooperate with what their significant shareholder wants to do," Choi said.
Fiera Capital Corp is the second-largest shareholder of Bellatrix with a 5.2 percent stake.
When contacted by Reuters, Troy Winsor, a representative of Bellatrix declined to comment on Orange Capital's move.
Calgary, Alberta-based Bellatrix's shares were trading at C$8.69 in afternoon trading on the Toronto Stock Exchange.
Bellatrix, with four "strong buy" and 10 "buy" rating, has a median price target of C$12.50 on its stock.
Reporting By Shubhankar Chakravorty in Bangalore; Editing by Don Sebastian