Many leading fund managers, including BlackRock, Fidelity and Citadel, filed forms 13-D and 13-G with the SEC recently, indicating that they had amended their ownership in U.S. exchange traded energy companies.
The 13-D/G reports are statements of significant ownership of more than 5% of the voting class of a company's securities, and they are also important due to their timeliness. While 13-F filings are quarterly, and are required to be reported within 45 days after the end of the quarter, 13-D/G's are required to be filed within ten days of the underlying transaction. Furthermore, 13-D/G's are often a precursor to a hostile takeover, company breakup or other "change of control" events, and will often include a letter to management explaining the reason for their taking a large stake in the company, thereby giving more insight into the transaction.
BlackRock, the largest institutional manager in the world, with over $3.6 trillion under management, including $1.1 trillion in 13-F assets, filed SEC form SC 13G/A on April 10th, indicating that it held 38.52 million shares of Kinder Morgan Inc. (KMI), an increase of 1.96 million shares from the 36.56 million shares that it indicated holding at the end of Q1/2013. KMI has been a favorite with the world's largest or mega fund managers like BlackRock, as during the latest available Q4/2012 for which consensus pick data are available, the world's largest or mega fund managers together added 48.39 million shares to their 234.64 million share prior quarter position in the company, and together they hold 25.0% of the outstanding shares in the company.
KMI is a provider of energy transportation and storage services in North America. After last year's merger with El Paso Corp. KMI became the operator of the largest natural gas pipeline network in North America, with over 80,000 miles of pipeline and 180 terminals. The pipelines transport natural gas, refined petroleum products, crude oil and carbon dioxide. The terminals store and handle gasoline, jet fuel, ethanol, coal, petroleum coke and steel. At $41 billion in market-cap, KMI is the largest midstream and the third largest energy company in North America.
In its latest Q1 released in mid-April, the company reported 28c in earnings, missing analyst estimates of 31c, and revenues came in at $3.06 billion, beating estimates of $2.92 billion. The stock is trading near multi-year highs, and at its closing price of $39.26 on Tuesday, it trades at 25 forward P/E, at par with the 25.0 average for its peers in the large-cap oil and gas pipeline group, while earnings are projected to more than double from 70c in FY 2012 to $1.55 in FY 2014. KMI also sports a strong dividend yield of 3.9%, comparable to the 4.5% average for its peers in the pipeline group. With U.S. crude oil production slated to grow rapidly, from an average of 6.5 million bpd in 2012 to 7.9 billion bpd in 2014, KMI is well-positioned to take advantage of this growth. Unlike energy exploration and production companies that can be affected negatively by this surge in production, KMI stands to benefit whether prices go up or down. We would be buyers of the stock on a dip back towards the 200-day moving average in the $36 to $37 range.
Besides KMI, the following are additional institutional 13-D/G filings last month in the energy sector (see table above):
- Apache Corp. (APA), an independent energy company engaged globally in the exploration, development and production of natural gas, crude oil and natural gas liquids or NGLs, in which BlackRock, the world's largest institutional manager with $3.6 trillion under management, filed SEC form SC 13G/A last Wednesday indicating that it held 24.55 million shares, adding 3.25 million shares to the 21.30 million shares it reported holding at the end of Q1/2013.
- Marathon Oil Corp. (MRO), that is a U.S. integrated oil and gas company engaged in worldwide exploration, production, refining, transportation and marketing of crude oil and natural gas, in which BlackRock, the world's largest institutional manager with $3.6 trillion under management, filed SEC form SC 13G/A on April 10th indicating that it held 73.01 million shares, adding 0.92 million shares to the 72.09 million shares it reported holding at the end of Q1/2013.
- Ensco Plc (ESV), an offshore contract drilling services company, in which mutual fund powerhouse Fidelity Investments, with $545 billion in 13-F assets, filed SEC form SC 13G/A on April 10th indicating that it held 15.63 million shares, adding 1.62 million shares to the 14.01 million shares that it reported holding at the end of Q4/2012.
- Halcon Resources Corp. (HK), engaged in the exploration and production of oil and natural gas primarily in TX, LA and OK, in which legendary billionaire investor Ken Griffin's Chicago-based hedge fund Citadel, with $38.6 billion in 13-F assets, filed SEC form SC 13G on April 29th indicating that it held 18.30 million shares, adding 6.00 million shares to the 12.30 million shares that it reported holding at the end of Q4/2012.
- Noble Corp. (NE), a leading independent energy company, engaged in the acquisition, exploration, development, production and marketing of crude oil, natural gas, and natural gas liquids in the U.S., and internationally in Argentina, China, Ecuador, Equatorial Guinea, the Mediterranean Sea, the North Sea and Vietnam, in which NY-based hedge fund Fir Tree Partners, headed by Jeffrey Tannenbaum, filed SEC form SC 13G on April 16th indicating that it held 21.0 million shares, a new position for it since it last filed for Q4/2012.
- Ultra Petroleum Corp. (UPL), an independent, exploration and production company focused on developing its long life, tight-gas sand resource play in the Green River Basin in WY, in which Morgan Stanley filed SEC form SC 13G/A on April 8th indicating that it held 0.18 million shares, cutting 0.35 million shares from the 0.53 million share position that it reported holding at the end of Q1/2013.
- Oil States International (OIS) provides specialty products and services to oil and gas drilling and production companies worldwide, in which New York-based event-driven shareholder activist hedge fund manager JANA Partners, led by Barry Rosenstein and Gary Claar, filed SEC form SC 13D on April 29th indicating that it holds 5.0 million shares, a new position since it last filed for Q4/2012.
- Rentech Inc. (RTK), engaged in the commercialization of its proprietary Rentech-SilvaGas biomass gasification process that converts multiple biomass feedstocks into synthesis gas (syngas) for the production of renewable fuels and power, in which CA-based hedge fund Park West Asset Management filed SEC form SC 13G on April 22nd indicating that it holds 11.49 million shares, adding 3.67 million shares to the 7.82 million shares that it reported holding at the end of Q4/2012.
- Transocean Ltd. (RIG), a provider offshore contract drilling for oil and gas wells worldwide, in which billionaire Carl Icahn filed multiple SC 13D/A's, the last on May 2nd including an open letter to RIG shareholders urging them once again to vote for his proposal to increase the dividend to $4/share and to support his three nominees to the board of directors.
Credit: Fundamental data in this article were based on SEC filings, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data are believed to be accurate, but no guarantees or representations are made.
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