After a double bottom at the $26 level in January, oil prices have staged a rally showing signs of recovery in the exploration and production business. Smart money were quick to pick up those signs and made a number of bullish bets on oil exploration companies. In this article we’ll take a look at the top 5 oil explorers that registered the largest increased in the number of long hedge fund positions.
Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).
#5 Cimarex Energy
Opening this top five is Cimarex Energy Co (NYSE:XEC). Whereas at the end of the first quarter 32 of the funds followed by Insider Monkey had this stock in their portfolios, that number increased to 39 by the end of the second quarter. The largest new position was established by Todd J. Kantor‘s Encompass Capital Advisors which amassed 221,106 shares valued at $26.4 million according to its latest 13F filing. So far this year, Cimarex Energy Co (NYSE:XEC) has been mostly in an uptrend, helped by positive results from oil exploration in the Permian Basin. During the second quarter, the company completed the drilling of several wells that showed great output rate. Although the Cimarex Energy Co (NYSE:XEC) reported a $270 million loss for the second quarter, when adjusted for one-time gains and costs the company actually earned $0.07 per share, surpassing analysts’ projections of $0.01 per share. Cimarex also reported $299 million in revenue, also ahead of investors’ expectations.
#4 WPX Energy
Next up is WPX Energy Inc (NYSE:WPX). According to our data, the number of long hedge fund positions increased by 10 during the second quarter, reaching 40 by the end of June. Mark Mcgoldrick and Jason Maynard are betting big on WPX Energy, which accounts for roughly 40% of their fund’s equity portfolio. According to its latest 13F filing, Mount Kellett Capital Management held 2.89 million shares of WPX Energy Inc (NYSE:WPX) worth $26.9 million at the end of the second quarter. At the end of the second quarter, the company announced it increased its position in the Permian Basin to a little over 100,000 net acres following the acquisition of 7,800 net acres in the Delaware basin from a private seller, which include existing production of 425 barrels of oil equivalent (boe) from 16 wells. WPX Energy Inc (NYSE:WPX)’s new estimates of net resource potential of its holdings also show a major increase in the number of drillable locations from 3,600 to 5,500.
#3 Pioneer Natural Resources
Pioneer Natural Resources (NYSE:PXD) has also seen its popularity increase among the hedge funds tracked by Insider Monkey, as the number of long positions surged to 74 at the end of June from 61 long positions registered at the end of March. Analysts have optimistic views regarding Pioneer Natural Resources (NYSE:PXD), recommending it mainly as a ‘Buy’. Barclays has recently boosted its price target for the stock to $190 from $175, reiterating its ‘Overweight’ rating. Analysts at Credit Suisse have also recently reiterated their ‘Outperform’ rating and have increased their price target to $212 a share, from $182.25 a share. So far this year, Pioneer Natural Resources (NYSE:PXD) has advanced by 40% through Friday’s closing price of $175.53 per share. Shareholders could be in for a ride, as analysts expect the company to return to profitability in the current quarter, projecting earnings of $0.20 per share. Jim Simons‘ Renaissance Technologies was among the funds that bought into this stock during the quarter, having gathered 427,393 shares reportedly worth $64.6 million.
#2 Eclipse Resources Corp
At the end of the second quarter, roughly 15% of Eclipse Resources Corp (NYSE:ECR) common stock was held by 24 of the funds in our database, a notable increased from just 7 positions at the end of the previous quarter. The company’s main assets are in the eastern part of Ohio, in the Utica and Point Pleasant formations. It is one of the largest players in the highly lucrative Utica shale, holding approximately 103,000 net acres. In the most recent quarter, Eclipse Resources Corp (NYSE:ECR) registered a 37% drop in revenue to $47.1 million, missing analysts’ expectations of $55.8 million. The company also posted a loss of $0.11 per share, worse than investors expectations of $0.07 per share. Analysts recommend the stock mainly as a ‘Hold’ with an average price target of $2.89 per share, which represents a downside potential of 10.91%, as shares ended Friday’s session at $3.24 per unit. Alec Litowitz and Ross Laser’s Magnetar Capital reported a fresh stake in Eclipse Resources Corp (NYSE:ECR) in its latest 13F filing, having indicated ownership of 5.06 million shares valued at $16.9 million at the end of June. Billionaire Ken Griffin has also stepped up his interest, having boosted Citadel’s stake in the company by 356% to some 3.04 million shares.
#1 Southwestern Energy Company
Number one in this top is Southwestern Energy Company (NYSE:SWN). The number of hedge funds invested in this stock grew by 20 during the quarter, reaching 48 by the end of June. Together these funds amassed approximately 27% of the company’s outstanding stock. Billionaire Steven Cohen was among those that made a big new bet on this stock, with his family office, Point72 Asset Management, having acquired 4.72 million shares by the end of the quarter. Tiger Cub Andreas Halvorsen is also betting big on Southwestern Energy Company (NYSE:SWN), as his fund, Viking Global, reportedly held 37.6 million shares worth $473 million, the largest position among the funds we follow. Southwestern Energy Company (NYSE:SWN) activates mainly in he Marcellus shale and Fayetteville shale regions. As oil prices tumbled in the recent energy slump, the company had to face the problem of its large debt load. The management has established a plan to shed $1.2 billion worth of debt by 2020, as it currently has $5.77 billion in long-term debt. For the second quarter, Southwestern Energy Company posted an adjusted loss of $0.09 per share, just above analysts’ consensus of $0.10 per share, and $522 million in revenue, down 32% year-over-year.