UPDATE 1-Sandell asks pipeline operator SemGroup to explore sale

Mon Jan 26, 2015 10:46am EST
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Jan 26 (Reuters) - Hedge fund Sandell Asset Management Corp asked pipeline operator SemGroup Corp to explore a sale among other options as energy companies look to pick up assets amid a steep fall in oil prices.

The company's shares were up more than 7 percent at $68.54 in early trading on the New York Stock Exchange.

New York-based Sandell said it believed SemGroup was worth $104 per share.

Oil prices have declined by more than half since June last year, primarily driven by a global supply gut.

The plunge in prices could lead to a rash of M&A activity in the North American oil and gas sector as companies look for attractive deals at lower prices, analysts have said.

Sandell said it believed there were a number of potential buyers who could be interested in the company's assets in the Montney and Duvernay Canadian shale basins and its U.S. mid-continent gas gathering and processing facilities.

Sandell's estimated value of the company is more than double the stock's intrinsic value of $42.58, according to Thomson Reuters StarMine.

The value is calculated using analysts' five-year earnings estimates and modeling the growth trajectory over a longer period of time.

Shares of the Tusla, Oklahoma-based company have lost nearly 17 percent of their value in the last six months. (Reporting by Narottam Medhora in Bengaluru; Editing by Saumyadeb Chakrabarty)