Oil and gas explorer Penn Virginia taps Jefferies for sale: sources

(Reuters) - U.S. oil and gas company Penn Virginia Corp PVAC.O has hired investment bank Jefferies LLC as it explores a possible sale, less than a year after it emerged from bankruptcy, as its former creditors seek to cash out, people familiar with the matter said on Monday.

The move illustrates how distressed debt hedge funds, which snapped up the bonds of oil and gas companies for pennies on the dollar during the energy price downturn now hold big stakes in companies that have exited bankruptcy and are seeking to sell as the sector slowly recovers.

The company said in March it was evaluating all strategic alternatives to maximize shareholder value.

Talks with potential acquirers are under way, and a deal is not certain because of the company’s high valuation expectations, the sources added.

The persons asked not to be identified because the deal negotiations are confidential. Penn Virginia and Jefferies did not immediately respond to requests for comment.

Penn Virginia shares were down 1.7 percent at $42.81 on Monday afternoon after rising 6 percent earlier in the session. The company has a market capitalization of around $650 million.

Houston-based Penn Virginia exited bankruptcy in September after wiping out $1.1 billion in debt. Its biggest shareholders now are hedge funds, including Strategic Value Partners LLC, Anchorage Capital Group LLC and Contrarian Capital Management LLC.

Since the beginning of 2015, more than 200 oil and gas explorers and producers filed for bankruptcy, as energy prices hovered near historic lows.

The Permian basin, which straddles Texas and New Mexico, has been a hot spot of deal activity, because its low production costs make it economical to drill there even when crude prices are depressed.

The nearby Eagle Ford shale, where Penn Virginia has operations, has been less active, but some companies have still made deals there. Most notably, Anadarko Petroleum Corp APC.N earlier this year agreed to sell its assets in the field for $2.3 billion to a venture owned by Sanchez Energy Corp SN.N and Blackstone Group BX.N.

Companies that historically had more gas output have shifted to oil to take advantage of relatively higher prices. Penn Virginia’s production is 71 percent oil, with the rest gas. It aims to shift production to 79 percent oil by the end of next year.

Reporting by Jessica Resnick-Ault and Jessica DiNapoli in New York; Additional reporting by David French in New York; Editing by Matthew Lewis