Despite giving much of his fortune away to various charities and his beloved Oklahoma State University, T. Boone Pickens still is a force to be reckoned with when it comes to oil stocks.
The wildcatter turned hedge fund manager made his millions on some pretty right-way bets within the oil patch. So it pays for investors to listen to what the energy mogul has to say.
And right now, T. Boone Pickens is pretty bullish about energy prices.
Pickens sees oil prices hitting $70 per barrel by the end of the year before rising to $90 in 2016, spurred by increasing demand and cuts in supplies.
And to play that rise, Pickens has been plowing new money into a variety of oil stocks. According to the latest 13F filing of Pickens’ TBP Investments Management, the hedge fund manager brought some new oil stocks into his portfolio, and added to a few existing positions.
Anyone looking to add some oil stocks of their own would do well to look at a few of T. Boone Pickens’ latest additions.
T. Boone Pickens Oil Stocks: Helmerich & Payne, Inc. (HP)
As energy producers have cut production in the wake of lower prices, oil stocks that specialize in doing the real dirty work — drillying — have suffered.
Even factoring in a slight recovery in 2015, shares of leading contract land driller Helmerich & Payne, Inc. (NYSE:HP) are off roughly 40% since last summer’s peak prices.
Yes, some of that drop is justified by the slowdown, but HP stock is at bargain levels when you consider you’re buying one of the best drillers around.
Helmerich has been successful at upgrading its fleet to new multi-pad and walking drilling rigs without taking on too much debt. That relatively clean balance sheet permits HP to generate some strong margins and cash flows, which in turn fuels a generous 3.9% dividend yield currently.
And considering that rig counts have actually begun to rise over the last few weeks in the wake of $60-per-gallon oil, HP is the position to capitalize on any increased activity; its advanced fleet of rigs actually makes it cheaper for E&P firms to drill.
Great margins, big dividends and potential value arbitrage? It’s no wonder why T. Boone Pickens started a 15,000-share position in TBP.
T. Boone Pickens Oil Stocks: Parsley Energy Inc (PE)
For energy firms in this new lower-priced environment, it’s all about location, location, location. And one of the best and lowest-cost places to drill happens to be the Permian Basin — the largest oil and natural gas basin in the United States, which been producing energy for years through conventional drilling.
Today, firms like Parsley Energy Inc (NYSE:PE) are applying fracking and horizontal drilling techniques to get at more of the Permian’s richest goods.
Parsley has focused on the formations “stacked” layers and has been able to deliver superior production increases. For Q1 2015, Parsley saw a 10% year-over-year increase (and a 4% quarter-over-quarter increase) in terms of how much oil and natural gas it pulled from the Permian.
Those positive results — along with rebounding oil prices — has prompted PE to actually raise capex and acreage acquisition spending for the rest of the year.
Add in Parsley’s liquidity position, and PE could be among one of the best oil stocks in the Permian. Pickens seems to think so, as he opened a 130,900-share position in Parsley Energy this past quarter.
T. Boone Pickens Oil Stocks: Eclipse Resources Corp (ECR)
Things might finally be turning around for small-cap oil firm Eclipse Resources Corp (NYSE:ECR).
ECR came public last summer — just as oil prices were peaking — so naturally, most of its short life has been spent in the doldrums. But with shares now down some 75% from their first day of trading, Eclipse could be a bargain-basement buy.
Eclipse’s value comes from its operating acreage in the Appalachian Basin. The firm owns land leases on 225,000 acres in the Utica and Marcellus Shale — right in the sweet spot of the two plays overlapping liquid rich windows. In many cases, Eclipse can drill through both shale formations with a single well. That helped the firm enjoy a 316% year-over-year increase in production for the first quarter of 2015 (as well as a 29% increase QoQ).
Those hefty production increases have come on the back of major cut to capex spending and a cancellation of a joint venture search. And given that ECR hasn’t fully monetized its vast acreage yet, it could be the wildcatter du jour for investors.
T. Boone Pickens must see something, considering he increased his stake from a mere 16,401 shares to 345,111 last quarter.
T. Boone Pickens Oil Stocks: Range Resources Corp. (RRC)
For investors looking toward more of a sure thing in the Marcellus and Utica shale, Range Resources Corp. (NYSE:RRC) could be a prime pick — which is why T. Boone Pickens opened a position by buying 23,744 shares of RRC last quarter.
RRC is the elder statesman of the Marcellus, operating on more than 900,000 acres and averaging 1.14 billion cubic feet of natural gas (Bcf) produced per day as of 2014. That vast acreage covers the liquids-rich window of the Marcellus and has enabled Range Resources to realize low drilling costs per well.
Aside from those lower costs, an aggressive hedging book (PDF download) will help it realize additional gains from its production. No near-term debt obligations and a relatively clean balance sheet are attractive traits as well.
Considering that within 2015’s first quarter, shares had dropped by roughly half their 2014 peak prices, it’s no wonder T. Boone Pickens jumped on the potential rebound play.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.