Activist threatens Halcon Resources with proxy fight unless board changes

HOUSTON (Reuters) - Activist investor Fir Tree Partners on Monday called on oil producer Halcon Resources Corp to appoint two independent directors to its board, threatening a proxy fight at the next shareholder meeting if it fails to do so or fails to put itself up for sale.

Fir Tree, in a letter to the Halcon board of directors, accused Halcon of “excessive” spending, pointing to executive compensation that outpaced its peers and private plane use by Chief Executive Officer Floyd Wilson, which it said was on track in the third quarter to top $1 million in 2018.

Halcon did not immediately respond to a request for comment. A representative for Fir Tree Partners did not respond to a request for comment.

Halcon was hard hit by the 2014 crash in oil prices and emerged from bankruptcy restructuring in 2016. While U.S. crude prices rebounded in the first half of 2018, the producer posted an $81.8 million loss in its third quarter and a $100.7 million loss for the nine-month period.

Fir Tree, which owns about 7.2 percent of Halcon, in October called for a sale of the company. On Monday, it said that if Halcon does not cut expenses and appoint new board members, Fir Tree may run a proxy contest at the next annual general meeting to replace its entire board.

Since October, Halcon shares have fallen by 56 percent. They were trading at around $1.75 per share on Monday.

Although Halcon’s assets are in the Permian Basin, the largest and fastest growing oilfield in the United States, Wall Street values its land at less than $5,000 an acre, compared with peers whose land is valued above $20,000 an acre, Fir Tree said in its letter.

“The unfortunate reality for Halcon is that it is an over-levered and sub-scale operator that cannot organically grow out of its problems in the current (or most any) commodity environment,” Fir Tree said.

Fir Tree also took issue with CEO Wilson’s compensation package, which it said was valued at $24 million when the company emerged from bankruptcy in 2016 and roughly $7 million in 2017, a year in which its stock fell by more than 50 percent.

Reporting by Liz Hampton; editing by Gary McWilliams and Grant McCool