In 2008, Pickens announced his own energy policy proposal: the Pickens Plan. Its goal is to reduce foreign energy dependency by bringing online alternatives to oil such as wind and solar. Regarding harnessing wind power, the Pickens Plan calls for the US to utilize what he terms the “wind corridor,” referring to the section of the midwest from north Texas through the Great Plains to the Canadian border, which he posited would generate new jobs and provide economic stimulus to the area. However, increasingly Pickens has been focusing less on the renewable energy front and more on the shift to natural gas to power the commercial transportation sector.
Top 10 Holdings:
Company | Ticker | Value ($000s) | Activity |
B P PLC | BP | 20,345 | 12% |
ENCANA CORP | ECA | 18,392 | New |
NATIONAL OILWELL VARCO INC | NOV | 14,262 | 0% |
DEVON ENERGY CORP NEW | DVN | 13,513 | 36% |
TRANSOCEAN LTD | RIG | 13,068 | 47% |
CHESAPEAKE ENERGY CORP | CHK | 11,563 | -12% |
WEATHERFORD INTL LTD NEW | WFT | 10,489 | 35% |
SANDRIDGE ENERGY INC | SD | 9,250 | 0% |
DAWSON GEOPHYSICAL CO | DWSN | 8,426 | 0% |
SUNCOR ENERGY INC NEW | SU | 7,063 | 0% |
Pickens stuck to his strong suit in energy with new picks Encana (ECA), Calpine (CPN), Exelon (EXC), Valero (VLO), and NRG Energy (NRG). He also added to BP Plc (NYSE:BP), Devon Energy (NYSE:DVN), RIG, and WFT. BP is not as attractive to us, having traded up to ~5.8x forward earnings, inline with peers Total SA (TOT) at ~5.7x and Marathon Oil (NYSE:MRO) at ~5.9x. Exxon (NYSE:XOM) and Chevron (NYSE:CVX) trade at slightly higher multiples, ~8.8x and ~7.2x, respectively, which we view as warranted given balance sheet strength, and diversity of revenue streams. BP is the most popular oil company among hedge funds, followed by Exxon Mobil. Value investor Seth Klarman had a $400+ million position in the stock at the end of the first quarter. Billionaires Ken Fisher and Ken Griffin are among the fund managers with large XOM positions. They both boosted their stakes in XOM during the first quarter (see Ken Fisher’s top stock picks).
Over the past couple of months there has been quite a sell-off in energy equities, and as we reevaluate the space, we are interested in companies that are scaling up and investing in shale. It’s a capital intensive business, but we believe this is becoming a major theme for oil producers. Based on that theory, we like Noble Energy (NBL), Occidental Petroleum (OXY), Devon Energy, and Pickens’ pick MRO. MRO may seem to be late to shale game, but on an EV/EBITDA basis, is cheaper than Hess (HES) and Murphy Oil (MUR). MRO has also been better about returning capital to shareholders. Kevin Bacon Moore is the top holder of MRO among the nearly 400 hedge fund managers we are tracking.