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T. Boone Pickens is a legend in the energy sector, especially in oil. Pickens made a name for himself in the 1980's as a corporate raider, using acquisitions and takeovers to expand his oil business. Then, in 1997, he left that all behind him to start a commodities fund. While that venture was not successful, losing 90 percent in less than 2 years, it was the start of something big - BP Capital (no relation to oil giant BP) to be precise.

BP Capital has been fairly successful. From 2001 to 2007, the fund averaged returns of 38% a year. Some of that success has waned in recent months - BP Capital's funds have a one-year return ranging from -17.62% to -19.77% and its funds have shrunk roughly 3.00% so far this year (as of 2/21/12) - but, if Pickens is right that oil will trade between $110 to $120 on average this year, 2012 could be a comeback year for the oilman turned fund manager.

Pickens shuffled things around in the BP Capital portfolio during the fourth quarter. The portfolio, which was valued at $140.42 million across 17 positions at the end of December, included two new positions for the firm - Transocean (RIG) and Golar LNG (GLNG) - and one holding that Pickens sold out of - EOG Resources (EOG). Pickens certainly knows his industry, but we have to question this last transaction. Selling EOG seems a bit ill-timed to us.

EOG Resources is a natural gas and crude oil company with operations in the US, Canada, Trinidad and Tobago, the UK and China. On Febuary 16, when EOG reported its fourth quarter performance, it annihilated analyst estimates. The company had an EPS of $1.15 a share, outpacing expectations of 88 cents a share. EOG also beat analyst estimates about its revenues, bringing in $2.77 billion over revenue estimates of $2.5 billion. EOG also increased its oil production by 54.7% last year and is expected to up its output again this year.

Pickens initiated an 180,300 share stake in EOG Resources in the fourth quarter 2010, when the company was trading at an average price if $93.65 a share. He upped his stake in the company by 18,600 in the next quarter. The average share price was $105.72. In the second quarter 2011, Pickens started to sell off his position in the company, until finally divesting of the company completely in the fourth quarter 2011. Pickens has made this type of short term play before with this company - buying in then selling out soon thereafter - but given that EOG Resources was trading at $114.35 a share when the markets closed on February 17, we think that selling out of his position may have been premature.

EOG Resources has a mean one-year target estimate of $122.08 and pays a 64 cents dividend (0.60% yield). EOG Resources is even priced fairly low relative to its future earnings, with a forward P/E of 16.67, and has really high earnings estimated going forward. Analysts predict the company's earnings will grow by an average of 72% per annum, versus expectations of 16.20% for its industry. Further, the stock was upgraded on January 10 by Deutsche Bank from "hold" to "buy".

Looking at Anadarko Petroleum Corporation (APC), one of EOG Resources' closest competitors, we have even more room for doubt on the timing of Pickens' sale of EOG Resources. Anadarko looks pretty good, but its metrics aren't great. The company was trading at $88.05 when the markets closed on February 17 and carries a mean one-year target estimate of $100.86, making for a nice upside. The company has a lower dividend than EOG Resources, paying just 36 cents a share (0.40% yield), and is priced higher relative to its future earnings with a forward P/E of 18.56. Analysts give the company an earnings growth estimate of 21.06% per annum over the next five years - that's quite a bit less than predictions about EOG Resources' earnings.

Anadarko is also changing its leadership. CEO Jim Hackett will be stepping down in May to be succeeded by Al Walker. The move is part of a staged succession - Hackett is retiring in June 2013 - but that doesn't mean it will be smooth sailing. Even with Anadarko's recent successes in Africa and the Gulf of Mexico, between the change in leadership and its metrics, we see a lot of cause for doubt, or at the very least conservative thinking. In contrast, there is nothing but good signs for EOG Resources going forward - the strong metrics, the earnings growth, the increase in production - what's not to love? EOG even got yet another nod from Jim Cramer on February 16.

Of course, maybe Pickens was just trying to free up some capital for the positions he initiated in contract drilling company Transocean and mid-stream liquefied natural gas (LNG) company Golar LNG.

Pickens opened a 162,900 share stake in Transocean during the fourth quarter. It was worth $6.25 million at the end of December. In the fourth quarter 2011, the average share price for Transocean was $47.23 a share. As of the close of trading on February 17, Transocean was going for $50.79 a share. It also has strong upside - it has returned 26.47% so far in 2012 (as of Feb 17) and analysts give it a mean one-year target estimate of $59.59 - and a high dividend of $3.16 (6.20% yield), but the company is priced a little high at 16.96 times its forward earnings and its earnings are expected to fall 74.70% this year. Granted, Transocean's earnings are expected to recover next year, and increase by 95.30%, but if that is the case why buy now? It seems like it would make more sense to buy in after the company misses an earnings estimate or the price otherwise takes a turn. In fact, both John Paulson and Ken Fisher reduced their respective positions in Transocean during the fourth quarter.

Golar LNG looks a little better, but not by much. The company was trading at $46.91 a share at market close on February 17 with a mean one-year target estimate of $50 a share. Golar also pays a decent $1.20 dividend (2.60% yield). Analysts give Golar a high earnings growth estimate of 88.00% per annum over the next five years, versus expectations for its industry of 7.29%, but it is priced high relative to its future earnings with a forward P/E of 21.04. Golar also has a lot of debt and, while it is profitable, returning roughly 155% in the last year, we can't recommend it. There are too many other good stocks out there to settle for an overpriced high growth stock that could have peaked already.

Source: T. Boone Pickens' Latest Energy Bets: Questioning Pickens' Sale Of EOG