Mariner Investment Group Powers Up On Energy Stocks In Q2

Mariner Investment Group LLC is a New York-based hedge fund vehicle founded by William J. Michaelcheck in 1992. Mariner and its affiliates advise single and multi-strategy hedge funds and funds of funds, as well as provide other alternative investment products and services. In late-June, Basil C. Williams stepped down from his position as co-chief investment officer of the alternative investment firm due to failed negotiations to renew his contract, so Mr. Michaelcheck became the sole CIO. The firm is a subsidiary of publicly-owned, Tokyo-based global financial services company ORIX Corporation, which owns a non-controlling majority ownership stake in Mariner Investment Group, with the hedge fund’s current and former principals owning a substantial minority interest.

Having briefly described the history of Mariner Investment Group, let’s discuss the hedge fund’s bullish stance towards the energy sector during the second quarter. The New York-based asset manager made a number of energy-related additions to its portfolio during the period, as well as boosted several existing energy-related positions. Mr. Michaelcheck’s investment firm oversees a $296.04 million portfolio as of the end of the second quarter, with energy investments accounting for 14% of the portfolio’s value. With that in mind, let’s see which energy stocks Mariner Investment was buying in the second quarter.

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Antero Resources Corp (NYSE:AR)

– Shares Owned by Mariner Investment Group (as of June 30): 83,400

– Value of Mariner Investment Group’s Holding (as of June 30): $2.17 Million

Mariner Investment Group LLC acquired a new stake of 83,400 shares of Antero Resources Corp (NYSE:AR) during the second quarter of 2016, which was valued at $2.17 million on June 30. The shares of the independent oil and natural gas company are up by 24% since the beginning of 2016. The company’s drilling opportunities are focused in the Marcellus Shale and Utica Shale of the Appalachian Basin. In early-June, Antero Resources agreed to acquire roughly 55,000 net acres on the core of the Marcellus Shale for $450 million. The transaction is set to close during the third quarter of this year. The company’s second quarter revenue excluding unrealized hedge losses was $728 million, up by 27% year-over-year. Antero Resources posted a $977 million non-cash loss on unsettled hedges for the quarter, reflecting rising natural gas prices. Stephen J. Errico’s Locust Wood Capital Advisers owns 613,890 shares of Antero Resources Corp (NYSE:AR) as of June 30.

Spectra Energy Partners LP (NYSE:SEP)

– Shares Owned by Mariner Investment Group (as of June 30): 149,500

– Value of Mariner Investment Group’s Holding (as of June 30): $7.05 Million

The New York-based hedge fund manager added a 149,500-share position in Spectra Energy Partners LP (NYSE:SEP) to its portfolio during the April-to-June period. The position was worth $7.05 million at the end of the second quarter and accounted for 2.4% of the value of the firm’s equity portfolio. The pipeline and natural-gas storage company has seen the value of its shares jump by a little less than 2% since the start of the year. Operating revenue from Spectra Energy Partners, the company’s largest business that focuses on providing transmission, storage and gathering of natural gas, was $618 million in the second quarter, up from $603 million recorded a year earlier. The increase was mainly attributable to expansion projects. The company’s Board recently approved a quarterly cash distribution of approximately $0.664 per share, which marked the 35^th consecutive quarterly increase to its cash distribution. The latest quarterly distribution provides an annual yield of 5.48%. Jim Simons’ Renaissance Technologies LLC was the owner of 310,200 shares of Spectra Energy Partners LP (NYSE:SEP) at the end of March.

The second page of this article will reveal three other energy-related equity investments favored by Mariner Investment Group.

EQT Midstream Partners LP (NYSE:EQM)

– Shares Owned by Mariner Investment Group (as of June 30): 91,190

– Value of Mariner Investment Group’s Holding (as of June 30): $7.32 Million

The asset manager founded by William J. Michaelcheck snatched up a new equity stake in EQT Midstream Partners LP (NYSE:EQM) during the three-month period ended June 30, which was comprised of 91,190 shares valued at $7.32 million at the end of June. The American oil and gas company that develops and acquires midstream assets in the Appalachian Basin has seen its market cap increase by a mere 1% since the beginning of the year. The company’s gathering revenue increased by $17.8 million year-over-year to $94.3 million during the second quarter, driven by production development in the Marcellus Shale, while transmission and storage revenue grew by $9.6 million year-over-year to $77.72 million, due to higher usage fees under firm and interruptible contracts and higher contracted firm capacity. Stuart J. Zimmer’s Zimmer Partners had 508,788 shares of EQT Midstream Partners LP (NYSE:EQM) among its holdings at the end of March.

Magellan Midstream Partners L.P. (NYSE:MMP)

– Shares Owned by Mariner Investment Group (as of June 30): 99,140

– Value of Mariner Investment Group’s Holding (as of June 30): $7.54 Million

Magellan Midstream Partners L.P. (NYSE:MMP) was yet another addition to Mariner Investment Group’s set of holdings during the second quarter of 2016. The New York-based asset manager acquired a stake of 99,140 shares of the company, which were worth $7.54 million at the end of June. The shares of the limited partnership engaged in the transportation, storage and distribution of refined petroleum products and crude oil are 3% in the green in 2016. The midstream operator recently increased its quarterly cash distribution for the 57^th time since going public in 2001, and is currently paying $3.28 per share on an annualized basis, amounting to an annual yield of 4.68%. The current yield may be viewed as low for an MLP, but it is attractive compared to most dividend-paying stocks. The second quarter distribution was increased to $0.82 per unit of common stock from $0.74 paid in the second quarter of 2015. Bernard Selz’s Selz Capital reported ownership of 434,650 shares of Magellan Midstream Partners L.P. (NYSE:MMP) in its 13F for the second quarter.

Enterprise Products Partners L.P. (NYSE:EPD)

– Shares Owned by Mariner Investment Group (as of June 30): 259,900

– Value of Mariner Investment Group’s Holding (as of June 30): $7.61 Million

Mariner Investment Group upped its position in Enterprise Products Partners L.P. (NYSE:EPD) by 202,000 shares during the three months ended June 30, ending the second quarter with 259,900 shares. The increased position was valued at $7.61 million at the end of the quarter and accounted for 2.6% of the value of the hedge fund’s portfolio, ranking as the fund’s fifth-largest position overall. The leading North American provider of midstream energy services to producers and consumers of natural gas, NGLs, crude oil, petrochemicals, and refined products has seen its stock advance by 6% since the beginning of the year. The company recently announced that three liquefied petroleum gas (LPG) cargo loadings from its Houston Ship Channel export terminal were cancelled in July and an additional five cargo loadings have been cancelled in August, as Asian buyers find it cheaper to pay large fees to cancel Gulf Coast contracts and then purchase spot cargo from the Middle East. John Zaro’s Bourgeon Capital owns 57,775 shares of Enterprise Products Partners L.P. (NYSE:EPD) as of the end of the second quarter.

Disclosure: None