T. Boone Pickens, an 85-year-old the founder of BP Capital, mainly invests in energy industry, mainly the oil/gas sector. His fund concentrates into several big oil/gas exploring and refining companies, with each of them representing more than 5% of his total portfolio. In this article, I will cover the three largest stocks in his portfolio including Valero Energy Corporation (NYSE:VLO), Southwestern Energy Company (NYSE:SWN) and Range Resources Corp. (NYSE:RRC). These three stocks combined accounted for more than 30.6% of his total portfolio as of Dec 2012.
Valero Energy Corporation (NYSE:VLO), incorporated in 1981, is an independent petroleum refining and marketing company, operating 16 petroleum refineries in the U.S., Canada, the U.K., and Aruba, and 10 ethanol plants in the U.S. Valero Energy Corporation (NYSE:VLO) has three main business segments: refining, ethanol, and retail. The majority of its revenue, $123 billion, or nearly 88.3% of the total operating revenue, was generated from the refining segment. The retail segment ranked second with $12 billion in revenue in 2012 while the ethanol segment contributed only $4.3 billion in sales. While the refining and retail segment generated $4.45 billion and $348 million in operating profits, the ethanol segment produced a loss of -$47 million.
As of Dec. 2012, T. Boone Pickens owned nearly 353,000 shares of the company, accounting for nearly 12% of his total portfolio. At $44 per share, Valero Energy Corporation (NYSE:VLO) is worth around $24.4 billion on the market. The market values the company quite cheaply, at only 4.82 times EV/EBITDA. At this current price, Valero Energy Corporation (NYSE:VLO) pays its shareholders a dividend yield of 1.8%. However, it still seems to have a conservative dividend policy, as the dividend payout ratio is only 17%.
Southwestern Energy – 100% proved reserves in natural gas
Southwestern Energy Company (NYSE:SWN) is an independent oil/gas company focusing on two main business segments: exploration and production, and midstream services. It had more than four trillion cubic feet equivalent in proved reserves at the end of 2012, with 100% of the proved reserves being natural gas. The majority of its revenue, $1.95 billion, or 71.8% of the total 2012 revenue, was generated from the exploration and production segment, while the midstream services contributed around $765.3 million in sales in 2012. However, while the midstream services generated an operating profit of $294.3 million, its exploration and production produced a loss of more than -$1.4 billion. A huge loss was caused by a $1.94 billion in natural gas and oil properties impairment charge.
T. Boone Pickens held 307,634 shares in the company, accounting for nearly 10.2% of his total portfolio as of Dec. 2012. At $39 per share, Southwestern Energy Company (NYSE:SWN) is worth nearly $13.7 billion on the market. The market is valuing the company at 9.22 times EV/EBITDA. Southwestern Energy doesn’t pay any dividends to its shareholders.
