Hedge Fund Farallon Files 13G On Energy Partners (EPL) ~ market folly

Wednesday, September 30, 2009

Hedge Fund Farallon Files 13G On Energy Partners (EPL)

Wednesday after market close, Thomas Steyer's hedge fund Farallon Capital filed a 13G on Energy Partners (EPL). In it, they have disclosed a 12.3% ownership stake with 4,903,423 shares. The filing was made due to activity on September 21st, 2009 and this is a brand new equity position for them. They did not hold an equity position in Energy Partners back on June 30th when Farallon disclosed their portfolio in their 13F filing. However, it is extremely likely that Farallon held senior notes that were converted into equity recently as EPL emerged from Chapter 11. While we can't be 100% certain of that, it is the most logical explanation as numerous other hedge funds have disclosed similar 13G's on the same date, implying that they all took part in the equity conversion a few days ago. This action comes right after we saw Steyer's hedge fund adjust their Capitalsource (CSE) position yesterday.

Farallon is a $1.5+ billion hedge fund founded by Thomas Steyer in 1986. They usually invest in equities, private investments, debt, and real estate. While they have a solid track record, 2008 was definitely a chink in the armor. After receiving redemption requests for almost 25% of their main fund's capital, they suspended withdrawals. Their poor 2008 also put them on the dreaded list of the top 10 asset losers. Read more about Farallon in our post about their background and positions.

Taken from Google Finance, Energy Partners is "an independent oil and natural gas exploration and production company. As of December 31, 2008, the Company had estimated proved reserves of approximately 90.8 billion cubic feet (Bcf) of natural gas and 21.6 million barrels (Mmbbls) of oil, or an aggregate of approximately 36.8 million barrels of oil equivalent (Mmboe). The Company’s operations are concentrated in the shallow to moderate-depth waters in the Gulf of Mexico focusing on the areas offshore Louisiana, as well as the deepwater Gulf of Mexico at depths less than 5,000 feet."

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