Kerkorian Rebuffs Delta Petroleum

• The Company: Delta Petroleum, a natural gas and crude oil producer.
• The Filing: FORM 10-Q filed with the SEC on November 6, 2008.
• The Finding: Investor Kirk Kerkorian’s Tracinda Corp., which owns 35 percent of Delta Petroleum Corp., withdrew its cash offer to buy an additional 14 million shares of the company for $11.00 per share, citing the recent decline in the share price of Delta and the continued uncertainty in the capital and stock markets as deciding factors.

The Upshot: To the contrary, now may be a propitious time for Kerkorian to increase his position in Delta Petroleum. The Company’s core areas of operations are in the Rocky Mountain and Gulf Coast Regions, which comprise the majority of its proved reserves. At September 30, proven reserves totaled 657 Bcf equivalent, worth an estimated $1.2 billion.

The company’s enterprise value of $912 million is worth $8.83 a share — a 57 percent premium to the current share price.

In February 2008, Kirkorian purchased 36 million shares of Delta Petroleum for $684 million, or $19 a share, which provided the exploration company with needed cash to move forward on its drill bit program in the Piceance and Paradox Basins in Colorado and Utah. Upon completion of the tender offer, Tracinda would have owned about 48 percent of Delta Petroleum.

The Question: Does Kirkorian’s decision have more to do with his $1 billion losing bet on Ford Motor — and less to do with the current outlook for energy assets?