Kimmeridge Energy urges Resolute Energy to pursue a sale or combination
Kimmeridge Energy Management Company, beneficial owners of almost 10% of the common shares of Resolute Energy Corporation, sent the following letter to Resolute's Board of Directors. The letter read, in part, "As beneficial owners of almost 10% of Resolute Energy Corporation shares, we are writing to you today as concerned shareholders. In 2017, Kimmeridge acquired a position in Resolute based on our belief that the Company's assets were materially undervalued in the market and that the Company had an opportunity to deliver significant value to shareholders by improving operational execution and engaging in appropriate strategic combinations or a sale of the Company. Yet since the time we invested in the Company, Resolute has continually failed to deliver on the promises made to the investment community. As a result, the Company's share price languishes and its competitive positioning in the Permian Basin dwindles...We believe...Resolute continues to trade at a steep discount to its relevant peers. In early 2018 it became clear that other significant shareholders shared this view, with Monarch Alternative Capital, VR Capital and Fir Tree Capital each independently filing Schedule 13D's encouraging the Company to pursue a sales process, a view that we wholeheartedly agree with...We were encouraged by the settlement between Resolute and Monarch, negotiated this past May, as the Company explicitly agreed to improve its governance structure and to add new independent members to Resolute's Board of Directors. Moreover, the Board made public commitments to "promptly conduct an in-depth review, assisted by its financial advisers, Goldman Sachs and Petrie Partners, of Resolute's business plan, competitive positioning and any potential strategic alternatives that will enhance the Company's goal of creating stockholder value."...It is of concern to us that, in conversations with other industry players, we have been left with the impression that Resolute has employed a passive approach to its strategic review rather than engaging interested parties in a serious sales process. During the same time, the Company has continued to fail to achieve the operational targets it set. In contrast, in the intervening time since shareholders have called for a sale of the Company, other Permian basin participants including Energen Corporation and RSP Permian have run successful sales processes while their respective acquirers moved forward with the type of consolidation that Resolute should be a part of. It is our belief that time stands still for no one, and certainly not for a subscale company that has committed to reviewing strategic alternatives while struggling to thrive in a competitive basin. We therefore ask that Resolute's Board: immediately launch a formal process with the goal of selling or merging the Company with another Delaware Basin operator before year end; Reduce corporate overhead costs in the interim, and; Deliver to shareholders the returns and value accretion that have been lacking. In the event that the Board and management team fail to actively and exhaustively pursue a sale or combination, Kimmeridge will consider all options, including seeking to install independent Board members to act in the best interests of the Company and its shareholders. "