April 5, 2018 / 2:02 PM / a year ago

Private equity firm Kimmeridge Energy boosts Carrizo stake, urges asset sales

HOUSTON, April 5 (Reuters) - Private equity firm Kimmeridge Energy Management Co said on Thursday it had boosted its stake in Carrizo Oil & Gas Inc by more than 65 percent and wants the U.S. shale producer to sell assets or merge with a rival to boost its sagging share price.

It was the latest prod by an increasingly impatient Wall Street for the U.S. shale industry to improve shareholder returns and focus less on production.

Shares of Houston-based Carrizo rose about 9 percent to $16.70 in morning trading. As of Wednesday's close, the stock had lost about half its value in the past year despite a jump in crude oil prices.

New York-based Kimmeridge said it now owns or controls about 8.1 percent of Carrizo's float, roughly 6.6 million shares, according to a regulatory filing. The firm previously held about 4.9 percent of the oil producer.

Representatives for Houston-based Carrizo did not immediately respond to requests for comment.

Kimmeridge said in the filing that it had grown increasingly concerned about Carrizo's debt, which has jumped 80 percent in the past five years to $1.63 billion, more than the company's market valuation.

Carrizo should sell its acreage in the Eagle Ford shale basin of East Texas to cull debt and focus entirely on its operations in the Permian Basin, the largest U.S. oilfield, the firm said.

Carrizo lost $17 million in the last quarter despite profits earlier in 2017, bucking the trend in the U.S. shale industry for improving results alongside rising commodity prices.

Kimmeridge said Carrizo should also consider a stock buyback or a merger with a Permian rival to boost operations there. Such a step is becoming common in the Permian. Concho Resources Inc last week said it would buy Permian rival RSP Permian Inc in an $8 billion all-stock deal.

If the company doesn't make changes within a year, it should sell itself, Kimmeridge said. (Reporting by Ernest Scheyder; Editing by Bernadette Baum)

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