Steven Cohen (Trades, Portfolio), leader of Point72 Asset Management, disclosed that he expanded his stake in Extraction Oil & Gas Inc. (XOG, Financial) by 226.17% on Aug. 30.
Point72 seeks to deliver superior risk-adjusted returns using long, short, macro and systematic strategies. Cohen founded the Connecticut-based firm in 2014 after his former hedge fund, S.A.C. Capital Advisors, was shut down following an insider trading investigation.
According to GuruFocus real-time picks, the billionaire investor invested in 6.3 million shares of the Denver-based energy company, which went public in 2016, for an average price of $11.45 per share. Cohen now owns roughly 9.15 million shares, representing 0.42% of his 940-stock equity portfolio.
GuruFocus estimates he has lost 5% on the investment since the fourth quarter of 2016.
The company, which focuses on exploration and production of oil and gas reserves in the Rocky Mountains, has a $2.01 billion market cap; its shares were trading around $11.46 on Wednesday with a forward price-earnings ratio of 7.38, a price-book ratio of 1.27 and a price-sales ratio of 2.24.
According to GuruFocus, the stock has fallen approximately 22% year to date.
The company reported second-quarter results on Aug. 7, posting earnings of 3 cents per share on $260.2 million in revenue, which grew 117% from the prior-year quarter as a result of higher production, higher oil cuts and improving crude oil prices.
In a statement, Chairman and CEO Mark Erickson said Extraction “reached another company record across all three production streams.”
“We remain focused on growing our crude oil production as it is the major driver of our revenues, cash flow and economics," he added.
On Aug. 31, the Denver Business Journal and Boulder Daily Camera reported that the Boulder County Commissioners and Lafayette filed a lawsuit against the Colorado Oil and Gas Conservation Commission and 8North, a subsidiary of Extraction, over two major drilling projects. The lawsuit is asking for the state agency’s approval of the projects to be overturned on the basis of the company failing to provide adequate evidence it owns all the mineral rights to the 4,000-acre area in which it plans to drill.
Weighed down by poor interest coverage and an Altman Z-Score of 0.41, which indicates the company is at risk of going bankrupt, GuruFocus rated Extraction’s financial strength 4 out of 10. The company’s profitability and growth scored a 3 out of 10 rating as a result of poor margins and returns. GuruFocus warned the company has poor earnings quality, as indicated by its Sloan ratio of 29.57%. The company also has a Piotroski F-Score of 5, which suggests business conditions are stable.
With 5.22% of outstanding shares, Cohen is Extraction’s largest guru shareholder. Howard Marks (Trades, Portfolio)’ Oaktree Capital Management and Paul Tudor Jones (Trades, Portfolio) also own the stock.
Energy stocks make up approximately 13.33% of the guru’s $25.05 billion equity portfolio, making it the fourth-largest sector represented after consumer cyclical, health care and technology. Additional oil and gas producers Cohen holds, as of June 30, are Antero Resources Corp. (AR, Financial), Callon Petroleum Co. (CPE, Financial), Diamondback Energy Inc. (FANG, Financial), Halcon Resources Corp. (HK, Financial), Laredo Petroleum Inc. (LPI, Financial), Murphy Oil Corp. (MUR, Financial), Par Pacific Holdings Inc. (PARR, Financial), PDC Energy Inc. (PDCE, Financial) and SandRidge Energy Inc. (SD, Financial), among others.
Disclosure: No positions.
