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Odds and Ends: Out of Gazprom into Oil States Intl.

May 19, 2014

I hate to say it but I liquidated my position in Gazprom (OGZPY) after just 2 months and a 25% gain. Ouch! I hate trading in an out of a position so quickly, but when something goes up 25% in 2 months I feel like lady luck has smiled on me and its time to take a little money off the table. Especially since my conviction level for this investment was pretty low. In any case I may repurchase the position if the share price dips or the investment climate in Russia improves.

I’ve recycled the proceeds from my sale (plus a little more) and taken a position in Oil States International. It’s a company in which both Greenlight and Jana Partners have had an activist position for the past several years, and management finally agreed to the activists’ spinoff strategy; the company will spin-off its lodging component at the end of May (May 30 expected distribution with a record date of May 21). Actually, to all effects, the company is splitting in two: an oil and gas exploration and production company and a lodging company (Civeo) serving the oil and gas and mineral extraction industries. Each will be about the same size revenue-wise. The lodging company is exploring the possibility of becoming a REIT, probably not until 2015. In the meantime it will be paying a small dividend. This is a classic situation where management is untangling a ‘conglomerate’ that appeals to two different types of investor. I think Einhorn/Rosenstein are right that value of the sum of the parts will be greater than the current whole. You can read about the spin-off here. I won’t go into the specifics but I am looking for a 20%+ return for a 6 month to 1 year investment.

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