Hess Corp. (HES)
Hess Corporation, is a global integrated energy company engaged in the exploration for and the production, purchase, transportation and sale of crude oil and natural gas, as well as the production and sale of refined petroleum products, electricity. Hess Corp. has a market cap of $19.49 billion; its shares were traded at around $54.6 with a P/E ratio of 9.3 and P/S ratio of 0.6. The dividend yield of Hess Corp. stocks is 0.7%. Hess Corp. had an annual average earnings growth of 7.9% over the past 10 years. GuruFocus rated Hess Corp. the business predictability rank of 2-star.
Hess Corp. has generated positive free cash flow for five of the last ten years. In 2010 it fell to a loss of $779 million, from a gain of $128 million in 2009. It increased its capital expenditures by over $2 billion dollars in 2010. In 2010, Hess improved some of its financials from a not so good year in 2009 – it raised its return on equity from 5.5% to 12.6% in 2010, and its return on assets from 2.90 to 7.2%.
The company could have several potential catalysts in the near future, such as exploration in Indonesia and Brunei. It may also get approval of its Tubular Bells project in the Gulf of Mexico and may complete development of its Australian natural gas resources. Hess may also benefit from renewed drilling in Libya, if it renews its oil production after the defeat of the Gadhafi regime. Hess had signed an agreement with Libya in 2004 prior to the war, per CNN Money.
Pickens had sold out of his remaining 130,112 stake in Hess in the fourth quarter of 2010 at an average price of $68.94. He reestablished a position of 154,254 shares at an average price of $77.13 in the second quarter of 2011. The current price of $54.6 represents a 29.2% discount from the price Pickens paid.
Weatherford International Ltd. (WFT)
Weatherford International is one of the world's providers of equipment and services used for the drilling, completion and production of oil and natural gas wells. Weatherford International Ltd. has a market cap of $13.06 billion; its shares were traded at around $15.2 with a P/E ratio of 26.5 and P/S ratio of 1.3. Weatherford International Ltd. had an annual average earnings growth of 11.9% over the past 10 years.
In 2010 Weatherford raised its revenues to a record $10.2 billion. Revenues also grew every year since 2002, with the exception of a slight dip from 2008 to 2009. Free cash flow came to $151 million in 2010, following three years of near-billion dollar losses.
Weatherford is one of the largest multinational oilfield services providers in the emerging market of Iraq, which it calls “the last major untapped oil region.” It expects to further strengthen its oil and shale activity in North America to offset a reduction in conventional gas segments. Internationally, it has contractual commitment and start-ups in Algeria, Bangladesh, Iraq, Kuwait, Libya, Oman and Turkmenistan. It believes the interruption from political upheaval in the Middle East and North Africa will be brief but that it will negatively affects its operating results in the near term. Brazil and Colombia are its strongest growing countries.
On August 19, the government announced that it would start selling Gulf of Mexico oil and gas properties for the first time since the BP oil spill. An analyst listed Weatherford as one of the companies that might benefit from the development according to the Street.
Pickens added 128,885 shares to his holdings of Weatherford in the second quarter of 2011 at $19.67, for a total of 1,104,225 shares. Today, Weatherford trades for $15.20, a 22.8% discount.
National Oilwell Inc. (NOV)
National Oilwell is a worldwide leader in the design, manufacture and sale of machinery and equipment and in the distribution of maintenance, repair and operating products used in oil and gas drilling and production. National Oilwell Inc. has a market cap of $29.14 billion; its shares were traded at around $62.62 with a P/E ratio of 16.5 and P/S ratio of 2.3. The dividend yield of National Oilwell Inc. stocks is 0.6%. National Oilwell Inc. had an annual average earnings growth of 30.8% over the past 10 years. GuruFocus rated National Oilwell Inc. the business predictability rank of 4.5-star.
In 2010 National Oilwell produced $12.2 billion in revenue, less than $12.7 billion in 2009, which was a decline from $13.4 billion from 2008. Earnings increased 13% from 2009. Cash flow has been positive for the last five years, though it decreased each of the last three years to $1.3 billion in 2010.
Generally, 2010 benefitted from higher drilling activity when rig counts increased nearly 30 percent from 2009. This market improvement enabled revenues from two of the company’s reporting segments, Petroleum Services & Supplies and Distribution Services, to increase from the prior year. However the company’s largest segment, rig technology, declined in revenue in 2010 as it worked down its backlog of capital equipment mostly ordered by customers in 2007 and 2008.
Pickens added 40,040 shares of National Oilwell at $72.95 in the second quarter of 2011 to his existing holding, for a total of 208,040. National Oilwell now trades for $62.62, a 14.2% discount from the price Pickens paid.
Schlumberger Ltd. (SLB)
Schlumberger Limited is a global technology services company consisting of two business segments, Schlumberger Oilfield Services and SchlumbergerSema. Schlumberger Ltd. has a market cap of $105.81 billion; its shares were traded at around $73.11 with a P/E ratio of 24.8 and P/S ratio of 3.8. The dividend yield of Schlumberger Ltd. stocks is 1.3%. Schlumberger Ltd. had an annual average earnings growth of 6.3% over the past 5 years.
In the second quarter of 2010, Schlumberger’s revenue jumped 68% year over year to $9.62 billion, and free cash flow came to $300 million, down from $663 million. Strong results were driven by strong worldwide growth, double-digit growth in all product groups, growth in the U.S. and increased rig count for deepwater operations and increased exploration activity in the Gulf of Mexico.
The company notes that the acceleration in drilling and exploration in North America concurrent with growth internationally, as well as new shale plays, will make it difficult for the oils services industry to keep up, but it believes it is well positioned to meet demand.
In the second quarter, Schlumberger repurchased 8.2 million shares for a total of $706.7 million and extended its stock repurchase program to expire at the end of 2013.
Pickens bought 135,822 shares of Schlumberger at an average price of $85.22 in the second quarter. In the fourth quarter of 2010, he sold out his small holding of 210,737 shares at an average price of $74,07, significantly higher than what he bought then for – $58.69 per share – in the third quarter of 2010. Schlumberger has since dropped 14.2% to $73.11.