The biggest problem I see with Halcon Resources Corp (NYSE:HK) is that it has a high debt load. The company’s total debt load of $2.51 billion is greater than the current market cap of $2.26 billion. The stock has not been a great performer over the past year, dropping almost 35%. Recently, Jim Cramer said on Mad Money that he liked the stock, but that it’s a speculative play. I think that’s why Pickens is buying now. It’s a speculative play, but is down almost 35% in the past year. Pickens is buying the dip and banking on a turnaround.
A small cap stock Pickens bought is Goodrich Petroleum Corporation (NYSE:GDP). Goodrich Petroleum Corporation (NYSE:GDP) has interests in the Eagle Ford in south Texas, the Haynesville Shale and Cotton Valley Taylor Sand, and the Tuscaloosa Marine Shale. There have been several 1,000 Boe/d wells discovered in the Tuscaloosa Marine Shale and investors are waiting for news of more discoveries of this size. If more wells of this magnitude are discovered, look for Goodrich Petroleum Corporation (NYSE:GDP) to do well. If new wells end up being duds, look for the stock to sell off. Pickens is likely betting on more 1,000 Boe/d wells by buying the stock.
In Goodrich Petroleum Corporation (NYSE:GDP)’s latest earnings report, the company disappointed across the board. Revenue came in lower than expected and the company posted a loss of $0.76 per share. Expectations for next year remain high, with analysts forecasting revenue of $250.8 million and EPS of $1.78. Pickens is obviously banking on a turnaround and has high expectations for next year.
Pickens also added a refiner to his holdings by buying a stake in Marathon Petroleum Corp (NYSE:MPC). Marathon is the largest refiner in the Midwest. This gives the company access to cheaper Canadian and Bakken Shale oil for its refineries. Marathon Petroleum Corp (NYSE:MPC) has also been expanding its refinery operations by buying BP’s Texas City refinery and expanding its Detroit refinery for a total investment of $4.6 billion.
Pickens is likely buying Marathon Petroleum Corp (NYSE:MPC) betting on the company spinning off its retail operations or its pipelines. Marathon Petroleum Corp (NYSE:MPC) operates 6,100 Marathon Petroleum Corp (NYSE:MPC) retail stations and 1,460 Speedway retail stations. The company also has interests in 8,300 miles of pipelines. Overall, I like the refinery business and think Marathon Petroleum Corp (NYSE:MPC) is a good pick in the sector.
Foolish assessment
Pickens has made a name for himself in the energy sector and made billions of dollars for himself and his clients. By looking at his 13F, we get a peek at what he has been buying and selling. Pickens is a long-term energy bull, so he’s not buying these stocks for a trade.
The article 5 Energy Picks From T. Boone Pickens originally appeared on Fool.com is written by Mark Yagalla.
Mark Yagalla has no position in any stocks mentioned. The Motley Fool owns shares of Apache. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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