The energy sector has a year-to-date return of about 6%, and although this isn’t the highest of the economy’s dozen or so sectors (depending on the classification system), it still represents an attractive investment opportunity for hedge funds and other prominent investors, such as George Soros. Soros’ Soros Fund Management is one of the top-tier hedge funds we track at Insider Monkey, and we’ve found that it can pay to pay attention to this space. Learn more about our strategy here, and let’s take a look at Soros’ top five energy bets for the first quarter, via his latest 13F filing.
Number one
Soros’ holding in Pioneer Natural Resources (NYSE:PXD) increased to 2,322,781 shares, worth $288.6 million, from about 2.1 million shares, worth $222.6 million posted in the previous filing. Pioneer Natural Resources (NYSE:PXD) said it expects an annual production increase of 12%-16% in the 2012-2013 period and aims 13%-18% compound annual production advancement for the 2012-2015 period.
In January, the company announced a joint venture with Sinochem Petroleum, under which it will sell 40% of its interest in some 207,000 net acres in the Wolfcamp Shale play for about $1.7 billion. Both companies came to an agreement under which 86 horizontal wells are expected to be drilled in the Wolfcamp Shale during 2013, with a future extension to 165 in 2015. Pioneer Natural Resources (NYSE:PXD) shares have advanced by over 18% since the day of the announcement and currently trade near the $145 mark.
Number two
Next on the list is Energen Corporation (NYSE:EGN), in which Soros disclosed a $56.9 million position, containing 1,094,846 shares, up from a $17.4 million holding in Q4 2012, which involved 386,173 shares. Involved in the oil & gas exploration and production, Energen Corporation (NYSE:EGN) posted total production of oil and gas of about 5.9 million barrels of oil equivalents (MMBOE) in the first quarter of 2013 and said that it expects to reach 26.5 MMBOE by the end of 2013. For 2012, the company reported a total production of 24.1 MMBOE, so there’s strong growth on the production side, which is likely what Soros is watching here.
The best of the rest
In Plains Exploration & Production Company (NYSE:PXP), the hedge fund reported ownership of 879,914 shares, worth $41.8 million, down from 953,000 shares, worth $44.7 million as of the end of December. Recently, Plains approved an acquisition by Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX); Plains shareholders will receive a $3.00 per share special dividend, which will be awarded after the deal is completed, so this alone explains Soros’ bullishness.
Halliburton Company (NYSE:HAL) is represented in the equity portfolio of Soros Fund Management by a $33.1 million stake, which contains 820,241 shares. The holding surged from the previous amount of 396,700 shares, worth $13.8 million. In February, Halliburton announced a 39% increase in its quarterly dividend to $0.125 per share, and in its latest quarter (Q1 2013), the oil and gas E&P reported a record $7.0 billion. Halliburton’s management has stated that it’s focused on improving North American margins in the intermediate-term, and Soros may view the company as the best way to play America’s energy boom. Halliburton Company (NYSE:HAL)’s strength in the tight oil and gas space is underrated, and at 10.7 times forward earnings, the stock isn’t very expensive to take the leap at the moment.
Southwestern Energy Company (NYSE:SWN) is a new position in the hedge fund managed by George Soros. The fund disclosed a $16.7 million position. Southwestern had a strong first quarter posting an annual increase in production of 11% to 147.8 BCFE, and earnings of $0.36 per share versus a 30-cent EPS one year ago represents solid growth. The natural gas and oil E&P recently announced the purchase of some 162,000 net acres in the Marcellus Shale from Chesapeake Energy Corporation (NYSE:CHK) for $93 million, and Wall Street’s high price targets represent another +30% upside from current levels.
Final thoughts
George Soros has his billions invested in an array of publicly traded companies, and as of the first quarter, but energy is one space that all investors should monitor. From Southwestern’s steady growth to Pioneer Natural Resources (NYSE:PXD)’s joint venture, there are plenty of good bets in the mega-managers 13F, and Halliburton, Plains Exploration & Production Company (NYSE:PXP) and Energen Corporation (NYSE:EGN) are worth watching as well. Continue reading about hedge fund piggybacking strategies.
Disclosure: none
