During 1Q 2012, Steven Cohen of SAC Capital owned less than 1 million shares after upping his 4Q 2011 stake by over 650%. Then in 2Q, he reduced his position to less than 250,000 shares. This recent purchase represents a big increase in his Barrett stake; see all of SAC Capital’s holdings here.
Barrett increased production by 11% in 2011, up to 106.8 Bcfe, and has 46% of its production concentrated in the Piceance Basin. Barrett plans to increase production another 10-14% in 2012. The company has been adding oil to its portfolio, and targeting growth in the oil segment between 75-80%, whereas current production is about 90% gas. To make this transition, the company expects to burn $800-$900 million in capital expenditures.
Weak natural gas prices have put pressure on Barrett’s earnings, with the stock down 1% year to date. For the second quarter, the company posted EPS that was down 200% from estimates, posting actual EPS of negative $0.50 versus estimates of positive $0.50. 1Q earnings missed $0.41 estimates by posting actual earnings of $0.20. The company’s full year 2012 estimates are expected to come in down 79% from last year, but 2013 should be a positive rebound, up 124% from 2012 estimates. Barrett’s trailing P/E of 55 is well above its peer average of 15, but the stock’s forward P/E ratio looks much more reasonable at 31.
The company competes with the likes of Northern Oil & Gas, Inc. (AMEX:NOG) and Questar Corporation (NYSE:STR). For the upcoming quarter, Northern is expected to have sales growth of 90%, while full year sales growth is estimated to be 69% from last year’s totals. However, the company has had a tough time meeting EPS estimates each of the last four quarters. Northern has missed earnings by at least 4% each quarter, but the company trades at a PEG of 0.4. Questar on the other hand trades with a PEG of 3.3, with EPS growth expected to come in at 1.7% for 2012 and 6.8% for 2013. One point of stability for Questar is that their dividend payment yields 3.4%.
As well, Stone Energy Corporation (NYSE:SGY) and QEP Resources Inc (NYSE:QEP) are also notable competitors. Stone trades on the lower end of the valuation spectrum on both a P/E and P/S basis, with a P/E of 7 and a P/S of 1.5. However, Stone missed last quarter earnings by 23%, and EPS growth shows signs of slowing, estimated to be down year over year 25% for 2012 and 8% for 2013. Two big names that dumped their 1Q stakes in Stone during 2Q by over 40% are Ken Griffin and Israel Englander. Much like Questar, QEP pays a fairly high dividend in this low yield environment, yielding 3.4%. The company also was recently upgraded by UBS. QEP trades at the highest trailing P/E of 23, but also sports a forward P/E of 14.
Bill Barrett Corporation has seen a positive string of insider buys in recent months. This includes the most recent purchase by Carin Barth, who was added as a company director in July, and previously served on the board of Western Refining Inc. See our analysis on Barth’s purchase and the recent round of insider buys in its entirety.
Steve Shapiro of Intrepid Capital Management has Barrett as a top pick according to his 2Q 13F filing, having 5% of his 13F portfolio invested in the company. Of the funds we track, Steven Cohen’s recent purchase of Barrett now makes SAC Capital the most bullish fund in the industry, surpassing Shapiro’s 1.8 million shares. Other names in Barrett are Israel Englander, Jim Simons and Ken Griffin. Simons and Griffin each upped their stakes by over 2,000% in 2Q.
Cohen had downsized his 2Q position by almost 70% after Barrett execs posted poor earnings and lowered production guidance, but in August, the company revised production estimates upwards and analyst estimate an 18% increase in sales next year, possibly giving Cohen a reason to buy back into the company. Although Barrett trades at a premium on the P/E front, they are attractive from a valuation standpoint on a P/S basis. Barrett trades at a P/S of 1.6, with Northern at 4.3, Questar at 3.1, QEP at 2.0 and Stone at 1.5.
For a continued look at the hedge fund industry’s sentiment towards this stock, continue reading here.
