As the founder of BP Capital, T. Boone Pickens is among the most famous names in the business universe. He founded his first company, Mesa Petroleum, in 1956, leading it through the twists and turns of various entity changes for nearly forty years. Subsequently, after helping to fund ABP Capital, he took over the chief responsibility for managing both its Energy and Equity Funds. Today, he continues to market the Equity Fund, which specifically focuses on the gas and oil sectors. Pickens has a knack for two things: knowing when to strike and when to play big.
In this article, I take a look at Pickens's latest and most significant buys. Unsurprisingly, all of his latest stocks are related to the energy sector. At the end of the recent quarter, he has initiated positions in four stocks and made purchases in five additional stocks. At the same time, he sold out 26 stocks and reduced positions in 70 stocks. His latest significant picks are Exxon Mobil Corp. (NYSE:XOM), Athlon Energy Inc. (ATHL) and EQT Corporation (NYSE:EQT).
Percent of Portfolio
How Exxon Mobil is a Safe Investment
Exxon Mobil Corporation is an integrated oil and gas company involved in the exploration and production of crude oil and natural gas as well as the manufacture of petroleum products and transportation and sale of all three of these products. Pickens has purchased 75,000 shares of Exxon Mobil at a price of $86/share. At the moment, the stock is trading at around $94/share, or 12 times to earnings and 2.4 times to book value. As analysts are anticipating a fair value of around $98/share for this company, its stock still looks undervalued. Additionally, its forward price to earnings ratio of 12 offers a steady upside potential.
On the other hand, Exxon is also offering a solid dividend of $0.63/share. The company has a history of consistently increasing dividends and has done so over the past consecutive 31 years. As the company's free cash flows are providing complete coverage to its dividends, its dividends look completely safe to me. In TTM, its free cash flows are at $12.6 billion while dividend payments are at $10 billion. Further, its payout ratio, based on income, demonstrates similar trends. Exxon is aggressively working on its shares buyback program. At the end of the recent quarter, it has repurchased around 34 million shares for around $3 billion and is expecting to repurchase still another $3 billion of shares in the fourth quarter. Definitely, this aggressive buyback will hit the stock price and dividends in a positive way.
How Athlon Energy is a Safe Investment
Athlon Energy Inc., a mid cap corporation, is engaged in the acquisition, development and exploitation of unconventional oil and liquids-rich natural gas reserves in the Permian Basin. Athlon has been exceeding expectations and posting record production and cash flow while keeping highly efficient capital discipline for its drilling program. This success is highly encouraged by early flowback data from its initial horizontal well in Midland County. In Q3, Athlon drilled a record 46 gross operated vertical wells, five more than originally planned while running seven operated vertical rigs.
As it moves into the horizontal development phase, Athlon is seeking to apply its vertical operational expertise to the horizontal program, which can generate significant profits for the company. It commenced operating its first horizontal rig in Q3, which effectively drilled two Wolfcamp B wells in Midland County. With a smart investment strategy, at the end of the recent quarter, Athlon has generated record revenue of $88.4 million, an increase of 110% over the past year's quarter. The company has been able to attain record top line growth as a result of increased production volumes and commodity prices.
Seeing strong financial results and solid future outlook, Pickens has initiated a considerable position in Athlon Energy, purchasing around 150,000 shares. At this, its first appearance in Pickens's portfolio, Athlon currently ranks 6th place among his other stocks. I believe with a forward P/E of 24, this stock has strong upside potential and is well set to generate massive profits thanks to its smart investment strategy.
How EQT Corporation is a Safe Investment
EQT Corp. is an exploration and production company and conducts its business through three segments: EQT Production, EQT Midstream and Distribution. All of these segments are generating massive profits for the company. Recently, the company has announced Q3 earnings of $88.3 million, 177% higher than the Q3 of 2012. Operating cash flow was standing at $232.8 million, showing an increase of 36%, and adjusted cash flow per share was at $1.92, marking an increase of 68%.
EQT's earnings per share, adjusted cash flow per share, and operating income increased due to higher production sales volume, commodity prices, gathered volume and firm transmission capacity sales and throughput. Further, the company is looking to accelerate the development pace of its Marcellus play, which is its highest-returning asset, as well as co-development of the Upper Devonian play where appropriate. Finally, the company continues to focus on acreage acquisitions in its core Marcellus development areas as well as pursuing monetization of non-core or less core assets.
The company's increased drilling and investment in the deeper Marcellus gas shale play will stand as its primary growth driver. Investors are also demonstrating appreciation for EQT's investments and record-breaking returns on them - including Pickens. Over the past year, EQT's share price has risen by 41%. With a forward P/E of 25, the stock has strong upside potential.