Crude prices stayed steady this week as traders mostly held the $50 per barrel mark as inventory reports remained bullish (the EIA showed a draw of 5.2 million barrels) and sentiment remains optimistic. It seems that the volatility of the past might not occur in the near future unless a major economic indicator misses, or if OPEC and potentially some select non-OPEC countries fail to come to an agreement on exactly how they will cut production by the promised amount.
In this article, we will take a closer look at five companies, Kinder Morgan Inc (NYSE:KMI), Southwestern Energy Company (NYSE:SWN), Oasis Petroleum Inc. (NYSE:OAS), SM Energy Co (NYSE:SM), and Schlumberger Limited. (NYSE:SLB) and will analyse what the smart money investors tracked by us think about them.
While there are many metrics that investors can assess in the investment process, the hedge fund sentiment is something that is often overlooked. However, hedge funds and other institutional investors allocate significant resources while making their bets and their long-term focus makes them the perfect investors to emulate. This is supported by our research, which determined that following the small-cap stocks that hedge funds are collectively bullish on can help a smaller investor to beat the S&P 500 by around 95 basis points per month (see the details here).
Kinder Morgan Inc (NYSE:KMI) rose 3.6% this week largely on the back of Chairman and founder Rich Kinder’s comment that that he favored using excess cash flow for dividend hikes rather than expansionary capex or buybacks. Traders took note because Kinder Morgan’s debt/EBITDA levels are coming down ahead of schedule and the company will eventually have plenty of DCF per share to allocate to the dividend if energy markets continue to improve (as they have been for the last two quarters). If Kinder Morgan hikes its payout consistently, the stock could eventually regain its place as a dividend favorite among investors and traders alike. Warren Buffett‘s Berkshire Hathaway held 26.5 million shares of Kinder Morgan Inc (NYSE:KMI) at the end of June.
Southwestern Energy Company (NYSE:SWN) fell by 10.2%, largely caused by a disappointing third-quarter earnings report released on Thursday after market close. Southwestern earned $0.03 per share, missing the consensus estimate by $0.04 per share, while revenue at $651 million was down by 13.1% year-over-year and $20.89 million ahead of the consensus. Net production came in at 211 Bcfe, down from 249 Bcfe in the third quarter of 2015. Due to the challenging commodity price environment, Southwestern’s average realized gas price including the effect of derivatives fell to $1.73 per Mcf from $2.21 per Mcf in the third quarter of 2015. Of the 749 funds we track, 48 funds owned $1.35 billion worth of Southwestern Energy Company (NYSE:SWN)’s stock, which accounted for 27.40% of the float on June 30, versus 28 funds and $656.97 million, respectively, on March 31.
On the next page, we will examine the events that put Oasis Petroleum, SM Energy Co, and Schlumberger Limited in the spotlight.