Seth Klarman, a value investor and hedge fund manager of Baupost Group, acquired a significant stake in Vista Oil & Gas S.A.B. de C.V. (NYSE: VIST), an independent Latin American company engaged in the energy sector.
Vista Oil & Gas is focused on the identification, acquisition, and development of oil and gas fields in Latin American countries including Mexico, Colombia, Brazil, and Argentina.
Based on Baupost Group’s 13F filing with the Securities and Exchange Commission (SEC) in the third-quarter, Klarman acquired 6, 175,000 VIST shares for $31,925,000.
Its stockholding in Vista Oil & Gas represents 0.36% of the hedge fund’s portfolio. It is not among its top holdings, but it is interesting to note that Baupost Group’s ownership in the oil & gas company is 7.2%.
The numbers show that Klarman sees VIST as a value stock, trading at a lower price relative to its fundamentals. In other words, as a value investor, he believes that the oil and gas company has the potential to deliver significant returns to investors over the long-term.
Vista Oil & Gas Shows Strong Growth Potential
Since Klarman acquired VIST shares at an average price of $5.17 each, the stock has seen a rally of 42.5% to $7.37 per share, its closing price on Tuesday, January 28, 2020.
In the third quarter of 2019, Vista Oil & Gas reported that its production reached an average daily volume of 31,637 barrels of oil equivalent per day (boe/d), a 31% increase from its production in the same quarter in 2018.
Its total revenues declined 9.8% to $105.4 million primarily due to the decline of its crude oil revenues during the quarter. Its net profit was $21.5 million compared to a net loss of $27.9 million in the year-ago quarter.
The management of Vista Oil & Gas believes that the company is poised for growth. The company has a strong cash flow generation with significant upside and its Prime Vaca Muerta locations have solid results.
Aside from Klarman, David Neuhauser, the founder and managing director of Livermore Partners, also acquired VIST shares in the third quarter of 2019.
In a letter to clients, Neuhauser explained, “Vista is a strong growth company lead by Miguel Galuccio, the former CEO from YPF and founded by energy private equity mammoth, Riverstone Holdings. We met the Vista management team in Chicago the previous year and continued to monitor their progress. With the stock trading at an all-time low and major potential to meaningfully increase future production and cash flows, it was an opportunity we did not want to miss, and we didn’t.”
Neuhauser also noted that Klarman has significant stockholding on Vista Oil & Gas. It means that the value investor has huge confidence in the company’s management.
Article By: Marivic Cabural