Brent crude oil reached an 11-year low earlier this week, dragging down energy-related equities even lower for the year. Some analysts believe that oil prices will stabilize next year despite facing a sustained supply glut, while others believe that the prices of this commodity can go even lower. Insider trading watchers should have already noticed that the energy sector has been witnessing extremely high insider buying activity lately, which might suggest that energy stocks are poised to rebound in the forthcoming future. In fact, literally every corner of the energy industry has witnessed heavy insider buying; insider buying was reported at companies with both global and U.S. exposure, at exploration and production companies, at energy services and pipeline companies. Although I am not an expert on the energy sector, it is quite evident that energy-related companies will endure more pain before it gets better. Nonetheless, corporate insiders definitely have a more in-depth knowledge about the energy sector than most of us, and their trading behavior suggests that this sector is set to recover over the medium-run. With that in mind, this article discusses the insider buying activity reported at three energy-related companies and the recent performance of those companies.
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Plains GP Holdings LP (NYSE:PAGP) saw an insider buy a sizable block of shares this week. Director John T. Raymond bought 423,954 Class A shares on Monday at a price of $7.4 per share, lifting his overall holding to 573,954 shares. This Delaware limited partnership owns an interest in the general partner and incentive distribution rights (IDRs) of Plains All American Pipeline L.P. (NYSE:PAA), which owns and operates midstream energy infrastructure and offers logistics services for crude oil, natural gas liquids (NGLs), natural gas and refined products. Plains GP Holdings LP (NYSE:PAGP) recognized net income of $593 million for the first nine months of 2015, as compared with $958 million reported for the same period of 2014. The decrease was mainly attributable to the sluggish performance of its Supply and Logistics segment, which was impacted by the compression of differentials from the transitioning crude oil market and toughening competition (which pushed unit margins lower). However, the stock trades at a very appealing forward price-to-earnings ratio of 9.29, which is substantially below the average of 17.19 for the companies included in the S&P 500 Index. The number of hedge funds from our database with positions in the company climbed to 27 from 23 during the third quarter, amassing 7.10% of its outstanding common stock. Daniel S. Och’s OZ Management upped its stake in Plains GP Holdings LP (NYSE:PAGP) by 14% during the September quarter to 9.25 million shares.
Oneok Partners LP (NYSE:OKS) had two different insiders make purchases this week. Terry K. Spencer, Chief Executive Officer and President of the company’s general partner ONEOK Partners GP, reported buying a new stake of 20,700 shares on Wednesday at $28.9 apiece. Chairman of the Board for ONEOK Partners GP, John W. Gibson, snapped up 10,000 shares on the same day for $29.18 each, and currently holds 90,000 shares. This publicly-traded master limited partnership is engaged in oil and gas production, natural gas processing, gathering, storage and transmission. Its shares have declined by 26% since the beginning of the year and trade at a forward P/E ratio of 14.64. The company anticipates that its earnings for fiscal 2016 will increase relative to 2015 earnings, as a result of volume and fee-based margin increases. Even though the company has numerous fee-based businesses in its Natural Gas Liquids and Natural Gas Pipelines segments, Oneok Partners is still subject to the high risks associated with the commodity price environment (mainly in its Natural Gas Gathering and Processing segment). Nonetheless, Oneok Partners seems to be well-positioned to endure a sustained challenging environment and benefit from new opportunities along the way, mainly owing to its strong balance sheet and high liquidity. Israel Englander’s Millennium Management reported owning 297,395 shares of Oneok Partners LP (NYSE:OKS) through the latest round of 13Fs.
Last but not least, AmeriGas Partners L.P. (NYSE:APU) is another company that has witnessed heavy insider buying activity over the past several weeks. Director Lon R. Greenberg acquired 5,000 shares on Monday at prices that ranged from $32.27-to-$32.34 per share, boosting his stake to 20,000 shares. Chief Financial Officer Hugh J. Gallagher purchased 4,200 shares last Monday at a price of $33.2 per share and currently owns 8,332 shares. AmeriGas Partners represents the largest retail propane distributor in the United States, and has seen its shares decline 26% this year. Nevertheless, the stock trades at a relatively cheap forward P/E ratio of 12.64, so the company’s stock performance can achieve a much-needed turnaround should analysts’ earnings estimates be accurate. The propane industry is currently experiencing record inventory levels and facing the lowest propane prices in the past decade or so. Moreover, retail propane industry volumes have been on a decline over the past several years and the growth prospects for the upcoming years do not look satisfactory either. The financial and stock performance of AmeriGas Partners throughout 2015 has also been impacted by warmer-than-normal weather. Specifically, average temperatures in fiscal 2015 (based on heating degree days) were warmer than normal by 5.8% and warmer than last year’s average temperatures by 8.9%. Jim Simons’ Renaissance Technologies owns nearly 226,000 shares of AmeriGas Partners L.P. (NYSE:APU) as of September 30.