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A group of high-profile hedge funds hope to reverse the fate of North Sea oil and gas companies that have been frustrated in the past. With the soaring energy prices, they have established considerable positions in these companies.
Taconic Capital, CQS and Kite Lake Capital are funds with positions in Norwegian Energy Company (Noreco), Norway’s second-largest oil and gas producer, and its share price has plummeted by more than 99% since its peak before the financial crisis. .
Taconic and Kite Lake between them own more than 50% of the company’s shares. CQS, one of London’s largest funds, disclosed a slightly less than 13% stake in March, some of which are managed by billionaire founder Michael Hintze himself.
Caius Capital and Astaris Capital, a hedge fund founded last year by Martin Beck, the former co-founder of Sothic Capital, also have positions, and York Capital is also a shareholder.
Noreco’s market value is only 3.14 billion Norwegian kroner (270 million pounds), and it is unusual because it has such a high hedge fund in its shareholder register.
Last week, as Taconic’s Peter Coleman and Kite Lake’s Jan Lernout were elected to the company’s board of directors at the company’s annual meeting, the funds further strengthened control of the company.
Noreco used to be Norway’s second largest oil and gas company in terms of output, but was hit by the plunge in oil prices during the financial crisis. The company also suffered losses after a crack was discovered in one of its oil platforms in 2009. In 2018, the court lost the case and brought about US$470 million in damages to 20 insurance companies that wanted to pay for the crack.
But later that year, Taconic, Kite Lake, CQS and York helped fund Noreco’s acquisition of Shell’s upstream assets in Denmark, making it the second largest oil and gas producer in Denmark.
Hedge funds are now pinning their hopes that the company expects to double its production in the second half of 2023, thanks to the redevelopment of a portion of its equity, which is part of the purchase of assets from Shell.
One of them said that the move is aimed at supporting Noreco’s board of directors to support management to increase natural gas production.
The price of Brent crude oil fell from US$66 at the end of 2019, but due to the coronavirus pandemic that forced the economy into a lockdown, it fell below US$20 in April last year. However, due to economic opening and the slow recovery of international travel, traders bet on increased demand and prices rebounded to $70 this week, the highest in two months.
The fund also hopes that they can benefit from mergers and acquisitions in the energy industry, including the Crysaor merger. Reverse takeover Premier Oil and Waldorf Production at the end of last year buy Half of the North Sea assets acquired from Cairn Energy in March.
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