BP Capital Management Chairman T. Boone Pickens has been in the energy industry for over 50 years and is ranked the 328th richest man in the world by Forbes. Picken's hedge fund bought shares of the following companies during the most recent reporting period. Here's our commentary on each of his picks.
Apache Corp. (APA) is an oil exploration and production company, with significant presence in the Gulf of Mexico, East Texas and other major locations in North America. In addition, it has interests in the North Sea as well as onshore in Argentina. The stock has a TTM dividend yield of 0.6 and a forward yield of .5. The stock has traded in a band of $134 and $85, currently above both the 50 and 200 day moving averages, indicating likely upward momentum.
At a P/E of 13.84, it is below the industry average, down from the 5 year high of 35.58. Last traded at 128.06, the company has been making high quality investments in high quality resource areas, most recently the Alaskan Cook Inlet sale. The impact of its 2010 acquisitions should also be positive moving forward, particularly the Egyptian desert and Gulf of Mexico deepwater. At current the current share price, we think Apache represents a better bet than both Devon Energy (DVN) and Andarko Petroleum (APC).
BP Plc. (BP) is one of the largest integrated oil and gas companies in the world, with a presence in practically every corner of the globe. BP has a Dividend Yield of 3.64; its stock price has been, for the last twelve months, trading in a band of $49.50 & $34.16, the last trade being $46.20. The stock is well above the 50 and 200 days moving averages, and the latter has just cut the former from below, moving upward, signaling a possible upward long term momentum.
The company has not had the best of years with the North African unrest, Alaskan pipeline leak and of course, the oil spill, reflecting in the Q2 shortfall of earnings estimates. The fact remains that BP is an excellent long term bet and with the expenses out of the way, profits should return over the next few quarters --the stock is already turning upward. The 2 Trinidad blocks (among others) and other high margin projects going live in 2012 onward should make this an excellent entry point for BP.
Noble Corporation (NE) is a global contractor for offshore drilling in the oil and gas industry. It has a fleet of 73 mobile offshore drilling units and a floating production storage facility. The P/E ratio for Noble Corporation and the dividend yield are 32.99 & 1.42 respectively. The stock has been trading around the middle of the 52 week range of 30.23 - 46.72.
While Q2 has not been particularly encouraging, contracting activity is on the rise, as are operating days and utilization rates, which rose to 70% (mrq). The award for construction of 6 jackup units from Pemex as well as exercise of options to construct other high value jackups should boost revenues in the coming year. Many analysts believe that the stock is at the bottom, making an excellent investment for the medium term.
Occidental Petroleum Corporation (OXY), a U.S based company is involved in oil and gas exploration and production. The three segments of its operations are oil and gas, chemical and midstream. The company’s P/E ratio is 17.93 and has a dividend yield of 1.71. It is currently trading at $107.88, the higher section of the 52 week range of 72.13-117.89, below both the 50 and 200 days moving averages.
Although it has appreciated substantially in the past, with a likely stock split on the way and its unique strategy of buying declining resource fields and recovering remaining reserves at low cost, the stock provides an excellent platform for oil investment as oil reserves dry up around the world and oil prices look at further appreciation. With the Shah Gas field contract and a strong dividend payout ratio, the cash and capital return components are plenty of incentive to buy.
Murphy Oil Corporation (MUR) primarily operates as a holding company operating businesses in oil and gas exploration company. It is also involved in the refining and marketing of crude oil. The current stock price for Murphy is $69.71, whereas its 52 week bracket is $48.14 to $78.16 with P/E ratio and dividend yield being 14.70 & 1.58 respectively.
The stock is currently looking oversold on RSI and the moving averages look like they are flattening out or falling. However, the company is ‘refocusing’ on upstream business, which will benefit from high oil prices. The exit from loss-making refining should help the company stay on course with earnings, which took a positive turn for the first time since Jun 2010.
Canadian Natural Resources (CNQ) is engaged in acquiring, exploring, developing, producing, marketing and selling of crude oil. The North Sea, offshore West Africa and Western Canada are the main locations for the company’s operations. The P/E ratio for the company is 46.02, and dividend yield being 0.84. the stock last traded at 43.76, above the 50 and 200 day moving averages.
The company is heavily tied to oil prices and after a brutal Q1, the company believes that the forward outlook is in agreement with the bottom reached so far. Forest fires in May did not help the bottom line and with the Alberta agreement and Horizon Oil sands in our midst, the bottom does appear to be a thing of the past.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.