Diamondback Energy, Inc. (NASDAQ:FANG) and Oasis Petroleum Inc. (NYSE:OAS) were both subjects of two Form 4 filings with the SEC. Diamondback investor Wexford Capital, managed by Charles Davidson, disposed of 1.03 million shares in that company through three separate transactions between January 23 and 27, lowering their total share ownership to 3.3 million. On the other hand, Oasis investor SPO Advisory Corp, managed by John H. Scully, acquired 1 million shares in one transaction, raising their stake to 12.47 million shares.
Let’s start with SPO’s transaction. SPO Advisory Corp, a privately-owned hedge fund which was co-founded in 1990 by Scully, has been extremely bullish on Oasis Petroleum Inc. (NYSE:OAS) since the fourth quarter of last year when they began amassing what is now a sizable position in the oil production company. That buying spree was initiated by plummeting oil prices, which have sent Oasis’ stuck tumbling alongside it.
With U.S crude supplies at 80-year highs, march crude oil has tumbled to just $44.55 per barrel, a 55% decline since last summer, and a 40% drop since November. Oasis’ stock has fared even worse, falling 77% since July, and 57% since late October. That slide is what prompted SPO to jump on an otherwise strong oil producer, which plans to increase capacity by 10% this year, and has $1.6 billion in liquidity.
SPO first disclosed ownership of Oasis Petroleum Inc. (NYSE:OAS) stock in a filing on December 29, which showed they had amassed over 7 million shares from more than three dozen transactions between November 4 and December 29, all of one of which were conducted in December. In early January we reported that SPO added more than 2.0 million additional shares, bringing their total to over 10 million shares. Just two days later they disclosed adding another 1.3 million shares, before this latest purchase of 1 million shares, which has lifted them to 12.47 million shares in total.
The buying spree now makes them the largest shareholder among institutional investors, though they’re hardly the only hedge fund taking notice of the opportunity; Dmitry Balyasny’s Balyasny Asset Management has also initiated a new position in Oasis recently, disclosing ownership of more than 5.3 million shares.
So while sentiment is currently positive on Oasis Petroleum Inc. (NYSE:OAS) at its vastly decreased price, the same can’t be said of Diamondback Energy, Inc. (NASDAQ:FANG), at least among hedge funds. Despite suffering a 22% drop of their own since late July, investors still aren’t satisified with the stock at its current price.
Wexford’s latest sale of over 1 million shares is just the latest such move for the Greenwich, Connecticut-based fund, which was founded in 1994, and now manages a number of different hedge funds and private equity funds, with the energy sector being one of their areas of expertise. Once the largest shareholder of Diamondback Energy, Inc. (NASDAQ:FANG)’s among institutional investors with 7.2 million shares, which also made it the top pick in Wexford’s equity portfolio, they have since cut their exposure to Diamondback by more than 50% since September 30, with their latest sale bringing them under the 3.3 million share mark.
That continues a long run of trimming their exposure to Diamondback Energy, Inc. (NASDAQ:FANG), which dates all the way back to last year, when they began selling off a holding that once represented nearly 25% of their entire equity portfolio, as they owned 16.4 million shares at one point shortly after Diamondback’s IPO. It may simply be a case of Wexford taking profit from their once-sizable investment, as they’ve sold a majority of their holding at values three to four times what they initially purchased it for.
Despite Wexford’s continuing sell-off, analysts are high on the stock. First Call Corporation recently updated their rating on it to ‘Buy’, while several other analysts have recently reiterated ‘Buy’ ratings on the stock, including Canaccord Genuity, Wunderlich, and Roth Capital. Price targets on the stock typically fall in the $75.00 to $85.00 range, a healthy premium above its current price of $66.84.
Diamondback Energy, Inc. (NASDAQ:FANG), an independent oil and natural gas company, announced on January 21 that it was conducting an underwritten public offering of 1,500,000 shares of its common stock. Proceeds from the sale will be used to pay down some of the company’s debt. Other hedge funds with investments in Diamondback include Ken Griffin‘s Citadel Investment Group with 1.93 million shares as of September 30, Rob Citrone‘s Discovery Capital Management with 1.46 million shares, and Israel Englander‘s Millennium Management with 880,496 shares.
Disclosure: None
