Activists flex muscles as share prices languish

Calgary oil executives typically settle differences with major investors over a round of golf, a dinner at a swanky restaurant or at least privately. So it came as a rude shock in the city’s corner offices when in two separate instances, activist shareholders sent terse public statements to two Calgary companies demanding their managements get their house in order.

But with oil prices down more than 50 per cent in less than a year, shareholders are getting restless — and public. A dearth of mergers and acquisitions despite a fertile environment is also compelling shareholders to push companies to spruce up management and help their companies stand out among a sea of for sale signs in the oilpatch.

“There are no hostile takeovers typically in the oil and gas industry, and it’s done on a very friendly basis, but the reality is there is a lot of pain ahead for companies — Q1 is going to be terrible, Q2 will also be terrible,” says Ian Macqueen, partner at Toronto-based Paradigm Capital Inc.

“I expect that there will be more of this type of activity — people who are investing are trying to make sure that they get the most bang for their buck.”

Last week, Connecticut-based FrontFour Capital Group LLC informed Legacy Oil + Gas Inc.’s management it intends to nominate new board members and is reportedly seeking the ouster of its chief executive Trent Yanko on corporate governance issues regarding a personal loan guaranteed by the company.

On Tuesday, Toronto-based West Face Capital LLC made public a letter it sent to Gran Tierra Energy Inc.’s board, demanding the replacement of Duncan Nightingale with a CEO of its own choosing and five new board members as it “does not have confidence” in the current management.

Since then, Legacy has agreed to reschedule its annual general meeting.

Meanwhile, Gran Tierra’s showdown with West Face is set to escalate, after it snubbed West Face’s recommendation.

West Face, which has acquired a 9.8 per cent stake in Gran Tierra, would likely seek support from other major shareholders such as Massachusetts Financial Services, which owns 7.24 per cent, and Canada Pension Plan Investment Board, which has a 2.88 per cent stake. Both companies declined to comment.