T. Boone Pickens is perhaps the most famous energy-focused hedge fund manager in the world. At 85 years young, he has spent practically his entire life in the oil patch and there’s no sign of him slowing down. He started his firm BP Capital in the late 1990s with a few million dollars and grew that small amount to nearly $5 billion in 2008 at its peak. He lost a portion of that during the financial crisis of 2008 and 2009, but he still manages a few billion dollars. For any energy investor, Pickens’ activity in energy stocks is of particular interest. He talks to everyone in the oil business and is connected like no other person. Here are five of his latest stock picks.
Apache Corporation (NYSE:APA) is in a prime position in Canada as it owns 50% of the first facility approved by the Canadian government to export LNG. The Kitimat plant has received all the required regulatory approvals and a 20-year export license from the Canadian government. Besides the LNG facility, Apache Corporation (NYSE:APA) also has a 50% interest in 644,000 acres to explore for natural gas and a pipeline to transport that natural gas to the LNG facility. This project is a complete vertically integrated natural gas operation.
Apache Corporation (NYSE:APA) is also a play on the development of Egypt’s western desert. Apache is the largest acreage holder in this region with 9.7 million gross acres. Only 18% of this acreage has been developed. The company’s acreage in Egypt has a lot of potential, but has also depressed the stock price due to the political situation over there. Investors should note, however, that production never stopped and the fields are in remote areas of Egypt. While other energy names have been hitting 52-week highs, Apache is up not even 2% in the past year. Boone Pickens likely sees the potential for Apache Corporation (NYSE:APA) stock to catch up with its peers and that’s why he’s probably buying.
Pickens’ largest holding remains Pioneer Natural Resources (NYSE:PXD). Pioneer Natural Resources (NYSE:PXD) is an independent oil and gas company with most of its reserves located in the Permian Basin. The company also has assets in the Rocky Mountains, the Eagle Ford, the Barnett Shale, and in Alaska.
The biggest news out of Pioneer Natural Resources (NYSE:PXD) occurred last week when it announced the results from its first horizontal Wolfcamp Shale well in Martin County, Texas. This well saw its initial 24-hour peak natural flow rate of 1,572 barrels of oil equivalent per day with 77% oil content. That’s quite an impressive well!
Besides Pickens, Pioneer Natural Resources (NYSE:PXD) is a holding for George Soros. The stock has been a good performer for both fund managers, rising over 38% in the past year. Of the analysts that follow the stock, 25 have it rated as a Strong Buy or Buy.
A midcap name Pickens added is Halcon Resources Corp (NYSE:HK). Most likely, Pickens is buying Halcon for its 128,000 net acres in the Bakken/Three Forks Formations in North Dakota and Montana. The Bakken Shale is one of the most-promising energy plays in the world. North Dakota has experienced a boomtown-like feel as it has the nation’s lowest unemployment rate because of growth in the Bakken Shale.
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.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
