An oil pump jack pumps oil in a field near Calgary, Alberta, July 21, 2014.TODD KOROL/Reuters
Zargon Oil & Gas Ltd., a Calgary oil producer under pressure from a U.S. hedge fund, has slashed its dividend and had its borrowing base chopped by lenders.
Zargon shares plunged about 15 per cent Monday on the Toronto Stock Exchange after it cut its monthly dividend to one cent from three cents. The company's line of credit was reduced to $110-million from $130-million, it said. The stock closed at $2.47.
The moves come after Northbrook, Ill.-based Livermore Partners urged the oil producer to sell assets and cut costs, or sell itself to a better-capitalized rival.
It's the latest case of shareholder activism in the oil patch, which has picked up as commodity prices languish.
Gran Tierra Energy Inc. and Legacy Oil + Gas Inc. have each faced pressure in recent months. Legacy agreed to a takeover by Crescent Point Energy Corp., while Gran Tierra gave up board seats and a new CEO was appointed.
Zargon operates an enhanced-oil recovery project in Alberta that has struggled to reach full capacity. It's "too early in the process to throw in the towel and pursue strategic alternatives," TD Securities analyst Aaron Bilkoski said in a note Monday.
However, such a move is "probable" by year-end should the asset continue to struggle, he said. Zargon chief executive Craig Hansen could not be immediately reached for comment.