Kimmeridge Energy Management Co. has reached the first close on a new activist energy fund, according to people familiar with the matter, as it continues its push to revamp companies in the embattled oil and gas sector.
The New York-based private equity firm has raised $376 million so far for Kimmeridge Energy Engagement Partners II, the people said, asking not to be identified because the matter is private. The goal is to raise a total of $500 million sometime next year. The firm raised $159 million for its first energy activist fund.
Kimmeridge has pushed for changes at companies including Ovintiv Inc., which replaced its longtime Chief Executive Officer Doug Suttles in August. It also made investments in PDC Energy Inc., Cimarex Energy Co. and Oasis Petroleum Inc. with its first activist fund.
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The firm’s initial activist energy fund has a net internal rate of return of about 154% since it started investing in June 2020, according to figures from Preqin Ltd. That compares to a gross internal rate of return of about 101% at one of the most popular oil and gas exchange-traded funds, SPDR S&P Oil & Gas Exploration & Production ETF, over the same period.
Kimmeridge is pitching investors on the idea that the oil and gas sector is poised for a re-rating once companies can demonstrate consistent outsize capital returns, according to an investor deck reviewed by Bloomberg. For companies that are approaching their debt-reduction targets, that inflection point will be next year, Kimmeridge said in the presentation.
The firm’s activist strategy creates additional levers it can pull to push for better capital allocation and governance at the firms it invests in, the presentations shows. The new fund is targeting investments in five to 10 companies, with an average investment of about $100m.
Source: BNN Bloomberg
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