By Eric Winter
Legendary oilman turned financier T. Boone Pickens has been involved in the capital markets since the 1980s, gaining heavy momentum with corporate acquisitions after starting Mesa Petroleum, one the of the largest independent oil companies in the world at the time. He is currently the chair of his hedge fund, BP Capital Management, and has amassed a net worth of roughly $1.4bn. Not straying too far from his oil and natural gas roots, Pickens makes heavy commodity bets in the futures, derivatives and equities markets. We have compiled a list of oil plays that have been on his radar since this time last year and have sorted them by the dividend they pay out. Pickens isn't an income investor. He is probably attracted to the following dividend stocks because they offer high upside potential.
Occidental Petroleum Corp (NYSE:OXY) sits at the top of our list. The stock pays out a dividend yield of 2.4%. When compared to its performance in the past twelve months, the yield acts as a saving grace for this multinational. Many oil and gas equities saw a fair amount of market value lost in 2012 due to falling commodity prices. The majority of stocks on our list are no exception, contributing to Pickens' drop in portfolio value from $174mm in Q1 2012 to $98mm in Q3 2012. Despite posting consistently positive earnings throughout the year 2012 (only one miss, by a penny), OXY's reliance on crude oil price movement kept the stock down and could potentially do so in the future, especially in the presence of any infrastructure or nature-related issues. Billionaire Paul Tudor Jones recently upped his position by over 70% despite these potential risks (see his other oil holdings here).
Canadian Natural Resources Ltd. (NYSE:CNQ) is engaged in the entire business process of crude oil, NGLs, and natural gas production, from acquisition to marketing to sales. They operate primarily in Western Canada, although they have a presence in the North Sea and off the coasts of Africa as well. Similar to OXY, CNQ felt the burden of slumping natural resource prices and gave away over 16% of its share price since this time last year. They do have a dividend yield of 1.4%, although current investors would have missed the boat if not holding going into December 12th of last year. In Q4 of 2011, CNQ occupied almost 5% of Pickens' portfolio. He has since traded out of the stock according to his last 13F filing. Billionaire Ken Fisher of Fisher Asset Management is on his way to doing the same, reducing his position by 81% for the same filing period (view what remains here).
With a market cap of $24b, Devon Energy Corp. (NYSE:DVN) is the smallest oil company on our list. It engages in many of the same activities as CNQ, primarily through onshore activity in North America. The start of 2012 saw Pickens' holding 190,000 shares but eventually reducing down to 123,000 by Q3 2012, currently taking up 7.5% of his portfolio. DVN carries a dividend yield of 1.3% and is set to report earnings of $0.77 per share this month. We have a positive outlook on DVN for the rest of 2013, citing the cash balance of $5.3bn and availability to make acquisitions. Chilton Investment Company, headed up by billionaire Richard Chilton, has over $57mm of his capital invested.
BP Capital's best performing stock on our list came in the form of Halliburton (NYSE:HAL), which posted a 14.5% gain versus the double-digit losers that comprise the rest of this group. The stock also possesses a dividend yield of 0.9%; while not high, it certainly acted as a bonus to the rise in share price. Despite having negative earnings growth over a year prior, HAL carried a low P/E ratio of 14 last year, and analysts are projecting an even lower measurement of 10 going forward. Wall Street is clearly biased to the positive as well for this oilfield services provider, ranking the stock as a buy with only a few downgrades to neutral from the likes of JPMorgan and Standpoint Research. Pickens had a position in HAL this time last year, only to trade out of it towards the middle of 2012 and re-assume it in Q3 2012. Kevin D. Eng of Columbus Hill Capital Management initiated a position at the same time as well.
National Oilwell Varco, Inc. (NYSE:NOV) finishes out our list with a minor dividend yield of 0.8%. Similar to Halliburton, NOV provides services and equipment to oilfield and exploration companies. NOV recently posted positive earnings at the start of this month, inline with the consistent earnings beats they posted throughout 2012. Like many of his oil positions, Pickens' capitulated on a majority of his holdings going into this last filing, as the stock gave the worst performance in relation to the rest of our list. Billionaire Jeffrey Vinik decided to take an opposing view and built a $3.7mm position in the stock, primarily buying in the third quarter of 2012.