A leading hedge fund group are hoping to turn the tide of a devastated North Sea oil and gas company in which they have gained significant positions as energy prices soar.
Taconic Capital, CQS and Kite Lake Capital are among the funds that hold positions in Norwegian Energy Company (Noreco), the second largest oil and gas producer in Denmark, whose shares have slumped more than 99% since their launch. pre-financial crisis peak. .
Taconic and Kite Lake together own over 50% of the business. CQS, one of London’s largest funds, in March unveiled a stake of just under 13%, with part of the position held in the fund personally run by billionaire founder Michael Hintze.
Caius Capital and Astaris Capital, a hedge fund launched last year by Martin Beck, former co-founder of Sothic Capital, also have positions, while York Capital was also a shareholder.
Noreco has a market capitalization of just NOK 3.14 billion (Â£ 270million) and is unusual to have such a high concentration of hedge funds on its share register.
Last week, the funds further strengthened their grip on the company, as Peter Coleman of Taconic and Jan Lernout of Kite Lake were elected to the board of directors at the company’s annual meeting.
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Noreco was once Norway’s second-largest oil and gas company in terms of production, but was hit by falling oil prices during the financial crisis. The company also suffered after the discovery of cracks in one of its oil rigs in 2009. In 2018, it lost the lawsuit for some $ 470 million it had brought against 20 insurance companies that ‘she hoped to be able to repay.
But later that year, Taconic, Kite Lake, CQS and York helped finance Noreco’s purchase of Danish upstream assets from Shell, making it the second-largest oil and gas producer in Denmark.
Hedge funds are now basing their hopes on what the company expects to almost double production by the second half of 2023, aided by the redevelopment of one of the fields in which it has taken a stake in the framework the purchase of assets from Shell. .
The decision to sit on Noreco’s board was designed to help management ramp up gas production, one of the funds said.
The price of Brent crude fell $ 66 at the end of 2019, but fell below $ 20 last April as the coronavirus pandemic forced economies to lock in. However, prices rebounded to $ 70 this week, their highest level in two months, as traders bet on higher demand as economies open and international travel slowly picks up.
The funds also hope to benefit from mergers and acquisitions in the energy sector, including Chrysaor’s reverse takeover of Premier Oil late last year and Waldorf Production’s purchase of offshore assets. North to Cairn Energy in March.