Run by legendary Texas oil and gas executive T. Boone Pickens, BP Capital has been one of the most successful energy-focused hedge funds on the planet after he took just an investment of a few million dollars and turned it into earnings reaching roughly $5 billion. That helped Pickens amass an estimated $1.2 billion personal fortune and made him one of the leading — and outspoken — authorities on the global energy markets.
So when Boone talks, investors should listen.
BP Capital’s latest 13-F filing was just released, and while the holdings are as of the end of March, it still gives regular retail investors something of a window into Pickens’ latest thoughts on the state of energy in the U.S. … not to mention, it provides some potentially juicy stock ideas as well.
Here are five of Pickens’ best-looking holdings:
This isn’t your grandfather’s General Electric (GE).
The major industrial manufacturer is quickly becoming a key player in the oil services industry. During the past decade or so, GE went from “almost nothing” in oil and gas to investing more than $15 billion on expansion in the past few years. The firm makes a host of equipment needed to produce energy — including sub-sea trees and pumps — and as GE Oil & Gas posted a 16% year-over-year jump in revenue for 2012.
It also continues to add to its arsenal.
The latest buyout of artificial lift and pump-jack manufacturer Lufkin Industries (LUFK) will make oil & gas GE’s third-biggest unit. Given just how big global energy demand is getting, GE could be putting itself into a sweet spot for the future. Pickens is positioning himself well, too, by adding a 10,000-share stake in the industrial manufacturer.
If GE continues to rid itself of its troubled finance arm and goes back to “building things,” investors could be handsomely rewarded.
Apache (APA) is one of the largest independent oil and gas names in the United States, with approximately 3 billion barrels of oil equivalent in proven reserves and a market cap of just over $32 billion.
It also counts the prolific oilman as a new shareholder. BP Capital added about 120,000 shares of the firm during Q1 2013.
Pickens could attracted to APA’s long-term value. The company has made a name for itself for exploiting new and unconventional resources. However, recently Apache has run into some trouble with some of these assets — specifically, those in Egypt. Approximately 10% of the E&P firm’s reserves and about 20% of its production are located in the nation, and fresh stability and security concerns in the Middle East have weighed heavily on Apache shares.
However, those concerns are providing a big-time value as overall production at the firm continues to grow.
Analyst earnings estimates suggest that Apache has more of an upside than its larger peers. Yet, APA shares can be had for a forward P/E of just 9, less than the double-digit valuations you’ll see at rivals such as Exxon Mobil (XOM).
While Ohio’s Utica Shale might be a bust on the oil front, causing several major producers to back out of the play, Gulfport Energy (GPOR) has hit the liquid sweet spot in the state.
Gulfport continues to find the right acreage in the state, causing the company to realize a full 93% of its production coming from NGLs and shale oil. That focus on NGLs rather than oil — which producers like Chesapeake (CHK) hoped the Utica would contain in spades — could put GPOR in the driver’s seat as rivals continue to pack up their things and leave the region.
Already, Gulfport has drilled some of the best wells in the play for NGLs, but it continues to spend more on the region — nearly $500 million of its $580 million capex budget will go into developing its acreage there. That success as the NGL kingpin could be why BP Capital added 125,000 shares during the first quarter.
Investors might want to follow suit as the firm’s small market cap could make it a prime buyout target as larger companies look to bolster their production. Of course, even if that doesn’t happen, Gulfport’s more profitable production mix could be a big winner over the long haul.
There has been a little nasty war going on between coal and natural gas for dominance in America’s energy pie. The hydraulic fracking boom has reduced natural gas prices, so utilities have favored the fuel type when it comes to electricity generation. However, coal has once again begun to regain ground as it is now cheap enough to replace some natural gas use.
This back-and-forth is enough to make your portfolio spin. But none of it matters to CONSOL Energy (CNX).
That’s because the firm produces both coal and natural gas. CONSOL’s coal operations span both thermal coal for power generation and metallurgical coal for use in the production of steel, while it produces natural gas in the Marcellus and Utica shales. That makes it a prime way to play the future of energy production here in the U.S.
Perhaps more importantly, CNX’s energy operations are some of the most cost-effective. That focus on efficiency and cost could be why BP Capital expanded its position in the firm by 213%. Investors might want to follow suit as CONSOL continues to be beaten down by the general hate for coal, despite its natural gas assets.
Enterprise Products Partners LP
Obviously, if you pull natural gas and oil out of the ground, you need to move it to end-users across the country. That could help explain Pickens’ recent interest in pipeline and energy logistics firm Enterprise Products Partners LP (EPD). BP Capital kicked off a new 4,000-share position in EPD.
How Enterprise Products is moving that crude oil could be the real key top profits.
While everyone knows the company is a pipeline king, EPD is seeing huge growth from its crude-by-barge operations. As E&P firms have tapped regions like the Bakken, they have sought to move that energy to refineries on the Gulf Coast. A lack of pipeline infrastructure has led to an explosion in barge traffic along the Mississippi River.
Enterprise’s marine services unit has roughly invested $25 million on its fleet this year and now has 64 tugboats and 136 barges under its umbrella. Roughly 70% of those were used along the Gulf Coast and down the Mississippi River to transport crude oil and refined products like gasoline.
That unexpected growth area could be a big boom for EPD shareholders for years to come.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.