A top shareholder of Carrizo Oil & Gas Inc. is urging the Houston explorer to sell its South Texas portfolio or merge with a Permian Basin competitor to increase its value.

Kimmeridge Energy Management Co. indicated in a U.S. Securities and Exchange Commission (SEC) filing it now owns 8.1% of Carrizo, making it the fourth largest shareholder. The firm previously disclosed it owned a 4.9% interest.

Carrizo has taken steps to “enhance or maximize shareholder value” by selling noncore properties, but it should do more, said the New York-based firm. Carrizo, it said, carries too much debt and is too small in the areas where it operates to increase its share price without a major overhaul.

Despite strengthening crude oil prices, Carrizo’s share price has fallen by 41% in the past year and is considered one of the poorest performers among oil and gas peers. Meanwhile, its debt has climbed 80% in the past five years to reach $1.63 billion.

The company, whose major focus of late has been in the Permian’s Delaware sub-basin, reported a net loss of $23.4 million (minus 29 cents/share) in 4Q2017, while production climbed 13% to 62,417 boe/d.

Following Kimmeridge’s SEC filing, which was made on Thursday, Carrizo gained 11% to end at $17.15/share.

Kimmeridge advised the independent to “take one or more” steps to address its “low valuation,” which could include:

In response, Carrizo management said it agreed that assets are undervalued, but selling more assets is not in the company’s best interests.

“While the company expects to continue to supplement its development program by evaluating other opportunities in the market, it will only pursue any of these if it deems them to be accretive to, and in the best interest of, all shareholders,” management stated.

“Carrizo welcomes open communications with its shareholders and seriously considers all ideas that may lead to the creation of shareholder value.”

The producer also noted that management and the board have had “ongoing discussions” with Kimmeridge since it acquired a material stake in late 2017.

“While we expect communication with Kimmeridge to continue, the company is focused on creating value for all of its shareholders by continuing to execute on its corporate strategy of generating prudent, high-return production growth while reducing leverage, with the goal of being able to run a free cash flow positive development program in the future,” management said.

“Carrizo agrees with Kimmeridge’s assessment that its assets are currently undervalued relative to peer companies with similar quality acreage, but believes that executing on its development programs in the Eagle Ford Shale and Delaware Basin, while continuing to strengthen its balance sheet, will reduce the current discount valuation in its shares and create significant value for shareholders.”

Kimmeridge founder Ben Dell told the Wall Street Journal, “There should be a wave of consolidation. The biggest obstacle to that happening is management teams focusing on their own job preservation instead of what’s best for shareholders.” He also said, “If management wanted us to run the company, we’d be happy to do that, too…We are not your classical New York activist hedge fund with a short duration model.”

Kimmeridge in December closed its fourth fund at the $400 million hard cap and secured another $250 million in coinvestment pledges, which it said it planned to use to acquire and develop upstream assets in U.S. unconventional plays. Last year it also raised $350 million for a mineral fund focused on the Permian.