Hedge Fund Tells Compton Petroleum to Put Itself Up for Sale

Canada’s Compton Petroleum (CMZ) has been to told to put itself up for sale by its largest shareholder, reports Andrew Ross Sirkin in the New York Times' DealBook. In a letter Tuesday to the gas producer, hedge fund Centennial Energy Partners attacked Compton's latest business plan as “ill-conceived.”

“Your plan is an ill-conceived program that is highly dependent on commodity prices and external funding,” [Centennial managing member Peter] Seldin said in the letter addressed to Compton Chairman Mel Belich and Chief Executive Ernie Sapieha. “This is the type of planning that has earned Compton its valuation discount in the first place.”

“You need to put the company up for sale now,” Seldin said in the letter, warning that the hedge fund is prepared to mount a proxy war to get its way.

According to John Partridge of the Globe and Mail, Compton's latest business plan, unveiled on January 23, called for capital spending of about $1.6-billion between 2008 and 2010, which amounts to about $400-million more than Compton's current stock market capitalization of $1.19-billion.

Partridge reported that Centennial Energy Partners, which first began investing in Compton a decade ago, had first gone public with its disappointment with the company's performance in mid-December:

It demanded in a letter at the time that the company consider “strategic alternatives” in order to close the “discount” it argues has developed between its share price and the underlying value of its assets.

See Centennial Energy Partners' announcement