Meridian Contrarian Fund on California Resources Corp.
Thesis
California Resources combines conventional California oil and gas production with additional assets including real estate and a developing carbon-management business. Meridian originally invested after bankruptcy because it believed the company's collection of assets was misunderstood and offered multiple sources of value creation. The shares weakened as Middle East tensions eased and oil supply resumed through the Strait of Hormuz, leading the fund to reduce the position. Meridian nevertheless remains a holder because it continues to see value-creation opportunities outside the company's oil production business.
“We reduced our position in anticipation of this decline and still remain holders focused on the opportunities for value creation beyond oil production in CRC.”
Key risks
- Lower oil prices following Middle East de-escalation can pressure the conventional energy business.
- Resumption of oil supply through the Strait of Hormuz contributed to weaker sentiment toward the shares.