1 Energy Company Accommodating Investors to Unlock Value
There has been a lot of talk recently among management teams of energy companies about creating or enhancing shareholder value. For the most part, this is just speculation. One company, however, has decided that it's time to accommodate investors and do more than just talk. That company is Oil States International , which announced that it is spinning off its accommodations business into a separately traded public company.
Accommodations is an interesting business for Oil States. It's a leading provider of housing and related services to energy and mining companies. Because many of the world's top resource basins are in remote locations, accommodating the workforce is critical to retaining employees. Currently, Oil States has operations in the Canadian oil sands, Australia, and in many U.S. shale basins.
One area of particular note when looking at its U.S. operations is the Bakken. Housing and related services have been critical to the development of that shale play. In fact, Nuverra Environmental Solutions has pointed to its access to housing as being a competitive advantage for its business. CEO Mark Johnsrud built a housing business that he held on to when he sold his Power Fuels business to Nuverra. However, the relationship between Johnsrud and Nuverra has given the company access to housing, which has turned out to be a big advantage in retaining employees and keeping its customers happy.
Oil States has used its accommodations business to similar advantage, but it has gotten to the point where it has the potential to do more for investors as a stand-alone business. That is why the plan is to spin off the business by next summer into a C corporation. In addition, the company will assess the feasibility of converting the business into a REIT. If it does choose to go that route, and the earliest it could is the first quarter of 2015, it would certainly give income investors a very intriguing set of assets.
There are a lot of intriguing possibilities for energy investors these days -- Oil States isn't the only company looking at value unlocking opportunities. Coal and natural gas producer CONSOL Energy , for example, has said that "everything is on the table" to unlock value in its business. That could include separating the natural gas business again in addition to a variety of stand-alone assets that it could sell off.
Another name to watch is Occidental Petroleum , which appears to be prepping its California oil business for a possible spin-out. The company could also split off its international business, exploration and production business, as well as look at strategic options for its chemical and midstream assets. Investors have been pushing for the company to do something to create more value, and spin-offs tend to do that pretty quickly.
For now, those two companies are just talking about what could be done. Meanwhile, Oil States has taken the first step toward actually accommodating its investors by announcing a move to unlock value. Still, that doesn't mean that it's the best way to play the current energy bonanza.
Finding the right plays while historic amounts of capital expenditures are flooding the oil and gas industry have the potential to pad your investment nest egg much more than the quick profit from a spin-off. That's why the Motley Fool is offering a comprehensive look at three energy companies set to soar during this transformation in the energy industry. To find out which three companies are spreading their wings, check out the special free report, "3 Stocks for the American Energy Bonanza". Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free.
The article 1 Energy Company Accommodating Investors to Unlock Value originally appeared on Fool.com.Fool contributor Matt DiLallo owns shares of Nuverra Environmental Solutions. The Motley Fool owns shares of Nuverra Environmental Solutions and has the following options: long January 2014 $4 calls on Nuverra Environmental Solutions and short January 2014 $3 puts on Nuverra Environmental Solutions. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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