After being very volatile for the first nine months of the year, the price action in crude has suddenly become quiet as more participants buy into OPEC’s attempt to manage the market.
In this article, we recap some important events surrounding five energy companies this week, Oasis Petroleum Inc. (NYSE:OAS), Continental Resources, Inc. (NYSE:CLR), Baker Hughes Incorporated (NYSE:BHI), Seadrill Ltd (NYSE:SDRL), and Whiting Petroleum Corp (NYSE:WLL). In addition, we are going to discuss the hedge fund sentiment towards these stocks.
While there are many metrics that investors can assess in the investment process, the hedge fund sentiment is something that is often overlooked. However, hedge funds and other institutional investors allocate significant resources while making their bets and their long-term focus makes them the perfect investors to emulate. This is supported by our research, which determined that following the small-cap stocks that hedge funds are collectively bullish on can help a smaller investor to beat the S&P 500 by around 95 basis points per month (see the details here).
Continental Resources, Inc. (NYSE:CLR) and Oasis Petroleum Inc. (NYSE:OAS) were in the spotlight this week primarily due to crude prices steadily rising until Friday. WTI futures breached the $50 per barrel mark for the first time in many weeks on Thursday, and there is a sense that OPEC really wants to get its act together and manage oil prices. To try and hammer out all the contentious points before the November meeting, energy ministers from Iraq, Iran, Saudi Arabia and Russia are slated to meet in Istanbul next week. While no agreement is expected to come from the informal meeting, the gathering will give each side more time to discuss the sacrifices Saudi Arabia and others need to make to get crude back to a more sustainable range. Although the cartel hasn’t laid out what that range is, PIRA Energy Group chairman Gary Ross said on Wednesday that Saudi Arabia is likely targeting $50-$60 per barrel. Of the 749 funds that Insider Monkey tracks, 33 held shares of Oasis Petroleum Inc. (NYSE:OAS) and 44 were long Continental Resources, Inc. (NYSE:CLR) on June 30.
Although an increasing rig count isn’t necessarily good news for oil prices as it means more supply, the rising number is certainly good news for Baker Hughes Incorporated (NYSE:BHI), which is one of the leading rig servicers in the world. After more than halving during the first two years of the crude crash, the U.S. rig count has made a serious comeback. The U.S. crude oil rig count inched up for the sixth consecutive week, this time by three to 428. The more operating rigs there are, the more Baker Hughes makes in revenue. Throw in the fact that many service industry contracts have built-in price adjustments to crude prices and Baker Hughes’ cash flow could improve noticeably if crude prices trend higher. Ken Griffin‘s Citadel Investment Group almost doubled its stake in Baker Hughes Incorporated (NYSE:BHI) to 3.55 million shares during the second quarter.
On the next page, we examine Seadrill Ltd and Whiting Petroleum Corp.