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In this article, via an analysis based on the latest available Q4 institutional 13-F filings, we identify the small and mid-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 Buffett, George Soros, Carl Icahn, Steven Cohen and Mario Gabelli, that are well-known for their savvy in picking winning stocks year after year.

The investing activities of these guru fund managers in large-cap oil & gas exploration & production companies was discussed in a prior article, that can be accessed by clicking on the above hyperlink. Also, 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 oil & gas exploration & production group (for more general information on these guru funds, please look at the end of the article).

The following are the small and mid-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 have also outperformed their peers YTD (see Table):

Oasis Petroleum Inc. (OAS): OAS is engaged in the exploration and production of oil and natural gas in the Williston Basin in ND and MT. Guru funds together added a net $34 million in Q4 to their $60 million prior quarter position in the company, and taken together guru funds hold 3.1% of the outstanding shares. The top buyer was SMidCap-focused mutual fund company Columbia Wanger Asset Management, with $20.5 billion in 13-F assets ($28 million), and the top holders were SMid-cap focused value investors Keeley Asset Management, with $4.8 billion in 13-F assets ($45 million) and Columbia Wanger Asset Management ($37 million)

OAS shares are currently consolidating at their highs, up 13% YTD compared to the 8% average rise for the group. They trade at 12 forward P/E and 4.8 P/B compared to averages of 17.8 and 5.3 for its peers in the U.S. oil & gas exploration & production group.

Rosetta Resources Inc. (ROSE): ROSE is an independent oil & gas exploration & production company, with properties located primarily in South Texas and in Northwest Montana. Guru funds together added a net $32 million in Q4 to their $99 million prior quarter position in the company, and taken together guru funds hold 5.1% of the outstanding shares. The top buyer was legendary billionaire investor Ken Griffin's Chicago-based hedge fund Citadel ($30 million), and the top holders were Columbia Wanger Asset Management ($71 million) and Citadel ($31 million).

ROSE just reported its Q1 (March) quarter on Friday, beating revenues ($136 million v/s $127 million), but missing analyst earnings estimates (61c v/s 73c), and keeping full year production guidance unchanged from earlier estimates. Its shares are up about 12% YTD compared to the 8% average rise for the group, and they currently trade at 9-10 forward P/E and 4.1 P/B compared to averages of 17.8 and 5.3 for its peers in the oil & gas exploration & production group.

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

  • Denver-based Kodiak Oil & Gas (KOG), an independent energy exploration and development company focused on exploring, developing and producing oil and natural gas in the Williston and Greater Green River Basins in the U.S. Rocky Mountains, in which guru funds together added a net $65 million in Q4 to their $50 million prior quarter position in the company;
  • Penn West Petroleum (PWE), an open-end investment trust engaged in the exploration, development and production of oil and gas, mainly in western Canada, in which guru funds together added a net $23 million in Q4 to their $499 million prior quarter position in the company;
  • Sandridge Energy Inc. (SD), an OK-based independent oil and natural gas company, in which guru funds together added a net $7 million in Q4 to their $121 million prior quarter position in the company;
  • Plains Exploration & Production Co. (PXP), an independent oil & gas company, with properties in CA, offshore CA, the Gulf Coast, the Gulf of Mexico, and the Rocky Mountains, in which guru funds together added a net $3 million in Q4 to their $326 million prior quarter position in the company; and
  • Enerplus Corp. (ERF): ERF is an independent oil & gas producer, with property interests located in western Canada, as well as in the U.S. in MT, ND, PA, MD and DE, in which guru funds together added a net $1 million in Q4 to their $1 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 small and mid-cap oil & gas exploration & production companies (ex-natural gas focused companies):

  • Cimerex Energy Co. (XEC), an independent oil & gas exploration and production company operating in the Mid-Continent and Permian Basin areas of the U.S., in which guru funds together cut a net $97 million in Q4 from their $607 million prior quarter position;
  • Whiting Petroleum Corp. (WLL), that is an independent oil and gas company, with primary interests in the Permian Basin, Rocky Mountains, Mid-Continent, Gulf Coast and Michigan regions of the U.S., in which guru funds together cut a net $73 million in Q4 from their $152 million prior quarter position;
  • Denbury Resources (DNR), engaged in the acquisition, exploration, development and operation of oil and gas properties in the Gulf Coast region, in which guru funds together cut a net $33 million in Q4 from their $680 million prior quarter position;
  • Magnum Hunter Resources (MHR), an independent oil and gas company engaged in the acquisition, drilling and production of oil and natural gas properties in the U.S., primarily in WV, ND, TX and LA, in which guru funds together cut a net $7 million in Q4 from their $25 million prior quarter position;

Table

(click to enlarge)

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.

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 Outperforming Small And Mid-Cap Energy Exploration Picks By Guru Funds