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The average oil and gas exploration and production company, as represented by the SPDR S&P Oil & Gas Exploration & Production Index (NYSEARCA:XOP) is up 8% YTD, after a nearly 30% surge in 2010 and 2011. Fears over an Iranian conflict are keeping price of crude oil at elevated levels, despite near-term concerns of a flagging world economy and fears of a slowdown in China. Also, long-term fundamentals continue to be bullish, as eventually growth in the emerging economies of China, India, Brazil and others are bound to keep supplies tight and prices high. Natural gas, however, is another story, revolutionized by 'shale gas' that has driven prices lower and is positioning the U.S. for energy independence, that is, if politicians in Washington can summon the will to make that happen.

In this article, via an analysis based on the latest available Q4 institutional 13-F filings, we identify the large-cap oil & gas exploration & production companies (ex-natural gas focused companies that will be covered in a separate article) that are being accumulated and those being distributed by legendary or guru fund managers, such as Warren Buffet, George Soros, Carl Icahn, Steven Cohen and Mario Gabelli, that are well-known for their savvy in picking winning stocks year after year. Taken together, these guru managers are bullish on the group, adding a net $356 million in Q4 to their $19.12 billion prior quarter holdings in the group (for more general information on these guru funds, please look at the end of the article).

The following are the large-cap oil & gas exploration & production companies (ex-natural gas focused companies) that these guru fund managers are most bullish about, that are trading at a discount to the peers in their group, and that also have a high dividend yield relative to their peers (see Table):

Occidental Petroleum (NYSE:OXY): OXY is engaged in the exploration and production of crude oil and gas worldwide. It operates in three segments: Oil and Gas; Chemical; and Midstream, Marketing, and Other. Guru funds together added a net $171 million in Q4 to their $1.41 billion prior quarter position in the company, and taken together guru funds hold 2.1% of the outstanding shares. The top buyer was billionaire star fund manager Stephen Cohen's hedge fund SAC Capital Advisors, with over $15.7 billion in 13-F assets ($113 million), and the top holder was billionaire and investment legend Ken Fisher's Fisher Asset Management, managing $37 billion in 13-F assets ($450 million).

OXY reported its Q1 (March) last Thursday, beating revenue and reporting earnings in-line with estimates. Its shares trade at 9-10 forward P/E and 2.0 P/B compared to averages of 14.9 and 5.4 for its peers in the oil & gas exploration & production group, while earnings are projected to rise at a modest 6.1% annual rate from $8.39 in 2011 to $9.44 in 2013. Also, it sports a dividend yield of 2.4% compared to the 1.1% average for the group.

Talisman Energy (NYSE:TLM): TLM is a Canadian company engaged in oil, natural gas liquids and natural gas exploration and production internationally. Guru funds together added a net $33 million in Q4 to their $279 million prior quarter position in the company, and taken together guru funds hold 2.4% of the outstanding shares. The top buyer was San Francisco, CA-based mutual fund company RS Investment Management, with $10.5 billion in 13-F assets ($183 million), also the top holder at $275 million.

TLM reported its Q1 (March) on Tuesday, with revenues in-line and earnings missing analyst estimates (C$0.16 v/s C$0.19). Its shares trade at 10-11 forward P/E and 1.4 P/B compared to averages of 23.2 and 1.3 for its peers in the Canadian oil & gas exploration & production group, while earnings are projected to rise at a steep 46.2% annual rate from 58c in 2011 to $1.24 in 2013. Also, it sports a dividend yield of 2.1% compared to the 1.6% average for the group.

The following are some additional large-cap oil & gas exploration & production companies (ex-natural gas focused companies) that guru fund managers accumulated in Q4 (see Table):

  • EOG Resources (NYSE:EOG), engaged in the production and marketing of crude oil and natural gas in the U.S., Canada, Trinidad, U.K. and China, in which guru funds together added a net $277 million in Q4 to their $486 million prior quarter position in the company;
  • Pioneer Natural Resources (NYSE:PXD), that is engaged in the exploration and production oil and gas in the U.S. and South Africa, in which guru funds together added a net $136 million in Q4 to their $411 million prior quarter position in the company;
  • Apache Corp. (NYSE:APA): APA is 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 guru funds together added a net $93 million in Q4 to their $1.28 billion prior quarter position in the company;
  • Noble Energy Inc (NYSE:NBL), 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 guru funds together added a net $49 million in Q4 to their $126 million prior quarter position in the company; and
  • Nexen Inc. (NXY), a Canadian company engaged in the exploration and production of crude oil, natural gas, sulphur and chemicals, in which guru funds together added a net $25 million in Q4 to their $247 million prior quarter position in the company.

Besides these, guru fund managers based on their Q4 trading activity indicated that they are bearish on the following large-cap oil & gas exploration & production companies (ex-natural gas focused companies):

  • Andarko Petroleum Corp. (NYSE:APC), that is one of the world's largest independent oil and gas exploration and production companies, with a majority of its reserves located in the U.S., in the mid-continent in KY, OK and TX, offshore in the Gulf of Mexico, and in AK, in which guru funds together cut a net $365 million in Q4 from their $2.27 billion prior quarter position;
  • CNOOC Ltd. Adr (NYSE:CEO), a Chinese company engaged in the exploration and production of oil and natural gas primarily in offshore China, in which guru funds together cut a net $92 million in Q4 from their $398 million prior quarter position;
  • Canadian Natural Resources Ltd. (NYSE:CNQ), engaged in oil and gas exploration and production activities in Western Canada, the North Sea and offshore in West Africa, in which guru funds together cut a net $76 million in Q4 from their $380 million prior quarter position;
  • Range Resources Corp. (NYSE:RRC), that is engaged in the exploration and production of oil and natural gas in the south-western and Appalachian regions of the U.S., in which guru funds together cut a net $71 million in Q4 from their $1.21 billion prior quarter position;
  • Cobalt International Energy (NYSE:CIE), that is engaged in the exploration and production of oil primarily in the deepwater of the U.S. Gulf of Mexico, and in offshore Angola and Gabon in West Africa, in which guru funds together cut a net $35 million in Q4 from their $75 million prior quarter position;
  • Concho Resources Inc. (NYSE:CXO), an independent oil & natural gas company, engaged in the acquisition, development and exploration of oil and natural gas in southeast NM and west TX, in which guru funds together cut a net $11 million in Q4 from their $657 million prior quarter position;
  • Continental Resources Inc. (NYSE:CLR), an independent oil & natural gas exploration & production company with operations in the north, south, and east regions of the U.S., in which guru funds together cut a net $9 million in Q4 from their $57 million prior quarter position;
  • Murphy Oil Corp. (NYSE:MUR), engaged in the exploration, production, refining and marketing of oil and gas in the U.S. and U.K., in which guru funds together cut a net $9 million in Q4 from their $53 million prior quarter position.

Table

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Credit: Fundamental data in this article were based on SEC filings, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our 'opinions' and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.

Source: Top Undervalued High Dividend Large-Cap Oil And Gas Exploration Picks By Guru Fund Managers