COLUMN-Shareholder activists oust petroleum buccaneers: Kemp

Wed Jan 30, 2013 7:27am EST
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By John Kemp

LONDON Jan 30 (Reuters) - The arrival of a swarm of activist hedge funds and investors in the oil and gas sector may be good news for corporate governance, and possibly for shareholders. But it risks killing off the innovation and risk-taking which has revolutionised U.S. petroleum production over the last decade and transformed the global energy outlook.

Activist Carl Icahn has finally pushed Chief Executive Aubrey McClendon out from the Chesapeake, the firm he founded in 1989, and grew into the country's second-largest producer inside two decades.

Hedge funds TPG-Axon and Mount Kellett Capital are hoping to emulate that success by ousting McClendon's disciple, Tom Ward, from the top position at SandRidge.

Now Elliott Management is targeting the venerable John Hess, son of founder Leon Hess, at the eponymous corporation by trying to stack the board with its own handpicked nominees.

Elliott is best known for stalking the Republic of Argentina through the U.S. court system over its defaulted debts, and arresting a sail-training ship owned by the Argentine navy in Ghana before an international tribunal ordered it to be released.

The activist hedge fund has promised to boost shareholder value at Hess by installing a more independent and experienced board, refocus Hess's portfolio by spinning off its Bakken acreage and overseas assets, improve cost control and instil greater capital discipline.

The question is whether the arrival of activists with their emphasis on capital discipline, and the removal of the buccaneering entrepreneurs, will reduce the rate of innovation and harm the long-term outlook for U.S. oil and gas production.   Continued...