Domestic energy explorer
QEP Resources Inc.
) plans to separate its midstream business, QEP Field Services
Company, paying heed to the spin-off suggested by activist hedge
fund and the company's largest shareholder - Jana Partners LLC.
The natural gas gathering and processing business will be
separated along with QEP Resources' stake in the master-limited
QEP Midstream Partners LP
ABRAXAS PETE/NV (AXAS): Free Stock Analysis
QEP RESOURCES (QEP): Free Stock Analysis
QEP MIDSTRM PTR (QEPM): Free Stock Analysis
QUESTAR (STR): Free Stock Analysis Report
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The spin-off is in response to the pressure imposed by Jana
Partners LLC. Jana Partners holds a 7.6% stake in QEP Resources
and demanded this spin-off citing poor performance by the company
and suggesting the need for restructuring. Jana was also
unsatisfied with the way QEPM was created and asked for a more
complete separation of the MLP.
The board believes that this move will result in the maximization
of shareholder value and facilitate each business to thrive
independently, utilizing the resources and capital as per their
own strategic initiatives. This would also make each business
more competitive in their respective markets. Moreover,
management believes that the full potential of QEP's midstream
business is not reflected in its share price. Establishing
the midstream business as a separate entity will uncover greater
value for shareholders.
The board has directed management to commence work on
establishing the separate entity and will employ additional
senior management with experience in handling a standalone
Management is working on ways that would maximize the value of
this new business and evaluating the different separation
options. An update regarding the same should be available to
shareholders in the first quarter of 2014.
Shares of QEP Resources closed on $32.32 on Dec 2. After-hours
trading saw perked-up activity with shares rising 5.1% to $33.97.
QEP Resources, in its present form, came into existence following
the 2010 spin-off of
) oil and gas exploration and production business. The company
currently carries a Zacks Rank #3 (Hold), implying that it is
expected to perform in line with the broader U.S. equity market
over the next one to three months.
Meanwhile, one can consider better-ranked stocks in the same
Abraxas Petroleum Corp.
) that currently sport a Zacks Rank #1 (Strong Buy).