Be sure to check out our detailed stock analysis (click here). Billionaire investor and oilman-turned-hedge fund manager T. Boone Pickens runs an energy-concentrated hedge fund, BP Capital. His fund is generally invested 90% in energy-related stocks and 10% in commodities. With energy a hot-button topic, I thought it worthwhile to take a look at how one of the top energy investors and his hedge fund are investing for 2013 (see all of Pickens' picks).
Pickens is upping his stake...
One of Pickens' biggest bets is on Range Resources (NYSE: RRC), which is BP Capital's third largest holding after a 63% increase in the shares his fund owned during the fourth quarter. The oil and gas company now makes up 8.5% of the fund's portfolio. Range Resources does appear a bit expensive, trading much higher than the other oil and gas companies at 38 times earnings and 21.5 times cash flow, but its recent performance and growth prospects suggest the premium is warranted. Range managed to post higher production and lower unit costs last quarter, and the oil and gas company has a relatively diversified asset portfolio between long reserve-life Appalachian assets and large-volume Gulf Coast properties. The company also plans to up production for 2013, expecting 20% to 25% annualized production growth with its focus on increasing liquids production (read about fracking related concerns for Range).
Pickens' new positions...
Occidental Petroleum (NYSE: OXY) was a new position and now makes up 4.8% of Pickens' portfolio. The stock also pays a relatively solid dividend yield at 3.1%, which only consumes 38% of earnings (read more about safe dividend energy stocks). A couple compelling aspects about the oil and gas company include the fact that Occidental trades relatively in line with the industry, whereas it has an industry leading 7% return on assets and relatively low long-term debt to equity of 18%. Occidental has been divesting non-core assets and focusing on upstream business; now the oil and gas company has tailored its portfolio to long reserve-life properties with high crude oil exposure.
Marathon Oil (NYSE: MRO) was another new position for BP Capital, making up 5.6% of its portfolio. Marathon is another major oil and gas company that pays a nice dividend, yielding 2%. This is on a 30% payout of earnings. Exploration and production accounts for 90% of Marathon's total income; however, the company is venturing into oil sands mining and integrated gas. The sands segment mines and extracts oil sand deposits in Canada, while the integrated gas division transports products manufactured from natural gas, including LNG. What's more is that both of these segments are seeing robust growth. The oil sands business improved 9.1% year-over-year last quarter and the integrated gas segment saw income up 75% year-over-year.
Pickens' sell-offs...
Whiting Petroleum (NYSE: WLL) was 4.8% of Pickens' portfolio and he sold off his entire stake in fourth quarter. Whiting has a 52% long-term debt to equity ratio, relatively low for exploration and production companies, and the company even hired Merrill to seek out possible acquisitions. However, this was back in September 2012 and it appears that M&A chatter is cooling off, one possible reason that Pickens lost interest in the company. Whiting remains of the top three oil producers in the Bakken Shale, but is also being overshadowed by Kodiak and Oasis as major takeover candidates (see which bets in the Bakken are best). Pickens also already has a big investment with a Bakken Shale presence: Occidental.
EOG Resources (NYSE: EOG) made up 8.3% of Pickens' portfolio during the third quarter, but his fund sold off its entire stake during the fourth quarter. EOG has solid assets in two of the fasted growing shale plays in the U.S., the Eagle Ford and Bakken, but EOG has high exposure to the natural gas market, with natural gas accounting for around half of the company's reserves. The positive note is that EOG has set full-year 2013 crude oil production growth target at 28%. Although Pickens dumped his EOG stake, I believe EOG is a compelling growth story, with an industry leading 5-year expected EPS growth of 20%. EOG trades below Range Resources at 16 times earnings and has a long-term debt to equity of 44%, below Range's 122%.
Pickens runs one of the top energy-focused hedge funds. Did I mention he's a billionaire? He's made some big bets of late on a couple major oil and gas companies, Marathon and Occidental, while also upping his stake in Range Resources, all solid investments. On the other hand, his sales include the likes of a niche Bakken Shale operator, Whiting, and mid-level, diverse, operator EOG. Although there might be risks related to Whiting, I still think investors can find value in EOG.
Pickens is upping his stake...
One of Pickens' biggest bets is on Range Resources (NYSE: RRC), which is BP Capital's third largest holding after a 63% increase in the shares his fund owned during the fourth quarter. The oil and gas company now makes up 8.5% of the fund's portfolio. Range Resources does appear a bit expensive, trading much higher than the other oil and gas companies at 38 times earnings and 21.5 times cash flow, but its recent performance and growth prospects suggest the premium is warranted. Range managed to post higher production and lower unit costs last quarter, and the oil and gas company has a relatively diversified asset portfolio between long reserve-life Appalachian assets and large-volume Gulf Coast properties. The company also plans to up production for 2013, expecting 20% to 25% annualized production growth with its focus on increasing liquids production (read about fracking related concerns for Range).
Pickens' new positions...
Occidental Petroleum (NYSE: OXY) was a new position and now makes up 4.8% of Pickens' portfolio. The stock also pays a relatively solid dividend yield at 3.1%, which only consumes 38% of earnings (read more about safe dividend energy stocks). A couple compelling aspects about the oil and gas company include the fact that Occidental trades relatively in line with the industry, whereas it has an industry leading 7% return on assets and relatively low long-term debt to equity of 18%. Occidental has been divesting non-core assets and focusing on upstream business; now the oil and gas company has tailored its portfolio to long reserve-life properties with high crude oil exposure.
Marathon Oil (NYSE: MRO) was another new position for BP Capital, making up 5.6% of its portfolio. Marathon is another major oil and gas company that pays a nice dividend, yielding 2%. This is on a 30% payout of earnings. Exploration and production accounts for 90% of Marathon's total income; however, the company is venturing into oil sands mining and integrated gas. The sands segment mines and extracts oil sand deposits in Canada, while the integrated gas division transports products manufactured from natural gas, including LNG. What's more is that both of these segments are seeing robust growth. The oil sands business improved 9.1% year-over-year last quarter and the integrated gas segment saw income up 75% year-over-year.
Pickens' sell-offs...
Whiting Petroleum (NYSE: WLL) was 4.8% of Pickens' portfolio and he sold off his entire stake in fourth quarter. Whiting has a 52% long-term debt to equity ratio, relatively low for exploration and production companies, and the company even hired Merrill to seek out possible acquisitions. However, this was back in September 2012 and it appears that M&A chatter is cooling off, one possible reason that Pickens lost interest in the company. Whiting remains of the top three oil producers in the Bakken Shale, but is also being overshadowed by Kodiak and Oasis as major takeover candidates (see which bets in the Bakken are best). Pickens also already has a big investment with a Bakken Shale presence: Occidental.
EOG Resources (NYSE: EOG) made up 8.3% of Pickens' portfolio during the third quarter, but his fund sold off its entire stake during the fourth quarter. EOG has solid assets in two of the fasted growing shale plays in the U.S., the Eagle Ford and Bakken, but EOG has high exposure to the natural gas market, with natural gas accounting for around half of the company's reserves. The positive note is that EOG has set full-year 2013 crude oil production growth target at 28%. Although Pickens dumped his EOG stake, I believe EOG is a compelling growth story, with an industry leading 5-year expected EPS growth of 20%. EOG trades below Range Resources at 16 times earnings and has a long-term debt to equity of 44%, below Range's 122%.
Pickens runs one of the top energy-focused hedge funds. Did I mention he's a billionaire? He's made some big bets of late on a couple major oil and gas companies, Marathon and Occidental, while also upping his stake in Range Resources, all solid investments. On the other hand, his sales include the likes of a niche Bakken Shale operator, Whiting, and mid-level, diverse, operator EOG. Although there might be risks related to Whiting, I still think investors can find value in EOG.
