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Holly LaFon
Articles (9134)  | Author's Website |

T. Boone Pickens' Talk, Stock Recommendations From GIBI Dallas

Report from Great Investors' Best Ideas Conference: Pickens explains oil market and two stock picks

October 18, 2016 | About:

(Boone is up 300% for the year. Below are notes from his presentation at Tuesday's GIBI symposium in Dallas. They will be edited shortly. Follow the conference @guruhollyl.)

Oil’s going to move up. Inventory’s gone down. We need the oil is where we are. But it came to the sense of those that could really make it happen quick that the Saudis, Russia and Iranians have worked together. No matter how much you hate somebody, if you need money you will work together.

That agreement will be signed at the November open meeting. Saudis will cut back, Russians are going go to OPEC meeting and will maybe cap. All of this will come to us in the oil business. Today when it went down three years ago, we found ourselves in a spot in the U.S. We were at 1,609 rigs in November 2014, and today we have 425. We are drilling and all our activity just fell. The price didn’t fall as fast as I thought it would. We reached a peak of 9.6 million barrels. In 1970 was the high to 10 million. We went down to 4 million, but due to fracking we built production back to 9.6. Now we’re at 8.4. There are 425 rigs now, but you can’t replace the declining production.

What will happen: We’re at $50. We will be $60 by the end of the year. You don’t need to bet on it, but I have.

We will go back to work at $55-60 but don’t think the oil industry’s going to go back up to 1,600 rigs again. I don’t think that will ever happen again. When rigs are stacked they never come back to what they were. We’ll get back above 1,000 rigs, but I don’t know how much above.

Rigs now are getting good results. The rigs working are the best rigs. They have the best crews.

Q&A

Q: What are the reasons for two of your picks?

A: Pioneer Natural Resources (NYSE:PXD): I have been recommending it for 3-4 years. It has a tremendous amount of oil. West Texas has produced in the last 100 years 40-50 billions of barrels per year. Oil, now with fracking, West Texas is going to do 50-75 billion and Pioneer has 900,000 acres, and it’s all good. You can’t miss on Pioneer.

EOG Resources (NYSE:EOG) Is the most efficient operator of all.

Q: What might make your thesis not come true?

How could I be wrong? What happened is inventory came down, Saudis had enough. We were the ones that oversupplied market. Saudis didn’t cut. I missed on that one. I didn’t think they could sustain it.

There are not any others that have oil available that isn’t being produced other than Iranians. They had sanctions and there’s has now come back up and about maxed up at 3.7.

Where could I be wrong? A recession would do it. It could happen next year. Not early in the year. Larry Lindsay says next year. My internal guys think it won’t be early. Recession, but other than that I think I’m okay.

Q: So not much downside?

A: No, I don’t think there is. I think you’ll see $60 oil and it could be more. Sixty dollars will do it for me.

About the author:

Holly LaFon
I'm a financial journalist with a master of science in journalism from Medill at Northwestern University.

Visit Holly LaFon's Website


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