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Institutions buy into shale gas stocks in Q3 as commodity prices shoot higher

Led by Blackstone Inc., several private equity firms and Stanford University's endowment fund began to dip into pure-play shale gas stocks in the third quarter as commodity prices for natural gas shot higher.

Overall, institutional investors were net buyers of pure-play shale drillers as share prices climbed higher. Hefty purchases of stakes in Appalachian shale gas producers EQT Corp. and Southwestern Energy Co. led the action, according to third-quarter 13-F filings with the SEC that were analyzed by S&P Global Market Intelligence.

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Private equity fund manager Yorktown Partners LLC was the largest single buyer in the third quarter, taking a new nearly 10% stake in Southwestern Energy for $557 million, followed by Blackstone's new 2.5% stake.

Although Blackstone has 31% of its $43 billion stock portfolio invested in energy issues, the fund managers have avoided pure-play gas producers until 2021, according to Market Intelligence data. In addition to stakes in EQT and Southwestern, Blackstone disclosed Nov. 1 that it holds an 11% stake in Chesapeake Energy Corp. The previous approach to pure-play gas producers was in sharp contrast to Blackstone's heavy backing of private oil and gas companies that it hopes to eventually sell.

In the fourth quarter, for example, Blackstone Alternative Credit Advisors LP was part of a cash and stock deal to sell GEP Haynesville LLC to Southwestern for $1.85 billion, including 99 million shares of Southwestern stock. That deal is also expected to close in the fourth quarter.

Blackstone also bought a new 2.6% stake in EQT, the U.S.' largest natural gas producer, during the third quarter. Stanford University's endowment fund, Stanford Management Co., was the second-largest buyer of EQT stock in the quarter, picking up a 2.2% stake.

Two quantitative hedge funds, Millenium Management LLC and Renaissance Technologies LLC, decided not to hang around to see if the $9 billion combination of gas producer Cabot Oil & Gas Corp. and oil driller Cimarex Energy Co. works out. Both sold all their shares in what was Cabot stock before the Oct. 1 closing date and the christening of the company's new name, Coterra Energy Inc.

As the hedge funds were selling Cabot's stock before the deal closed, Australian investment manager Antipodes Partners Ltd. gave the merger a vote of confidence, picking up a new 2% stake in Cabot-turned-Coterra. At the same time, Antipodes purchased a new 0.8% stake in EQT. The purchases marked Antipodes' first investments in U.S. shale gas in years, according to Market Intelligence data and SEC filings.

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