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Occidental sees institutional investors flee in mixed Q1 for Permian producers

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Essential Energy Insights, April 2021


Occidental sees institutional investors flee in mixed Q1 for Permian producers

Independent shale oil producers have spent well over a year trying to reassure shareholders that they have changed their ways and are putting returns to investors ahead of growth. If first-quarter 13F filings with the SEC are any indication, a lot of institutional investors are still having a hard time believing those assurances.

A review of 11 of the largest oil-producing independents shows very mixed results in a quarter that was largely positive for other sectors. Five producers saw the institutional investors increase their stakes, five endured declines and one saw no net change.

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The independent drawing the most attention during the first quarter was certainly Occidental Petroleum Corp., which reached an agreement to purchase Anadarko Petroleum Corp. for $57 billion, a move that has been unpopular with shareholders thus far in the second quarter. In spite of promises made by Occidental CEO Vicki Hollub that the deal would be beneficial in the short and long term, the company's stock has been trading at its lowest levels in a decade in recent weeks.

In the first quarter, prior to the announcement of the merger, institutional investors led the charge in dropping Occidental stock, with a net decrease of 7.9 million shares — 1.2% of all shares outstanding — during the quarter. Barrow Hanley Mewhinney & Strauss LLC was the biggest seller, dumping 10.3 million shares of Occidental stock. Levin Capital Strategies LP and AJO LP sold 3.2 million and 2.5 million shares, respectively.

Lyxor International Asset Management SA was the largest buyer of Occidental stock during the quarter, adding 3.9 million shares to bring its total holdings to more than $326 million. Capital Research & Mgmt Co. added 3 million shares, pushing its total amount of Oxy stock to more than 5.3%.

Capital Research and Management was extremely active in the sector during the first quarter, buying and selling stakes in a number of prominent producers. It could now hold a major say in the operations of two pure-play Permian Basin companies, Concho Resources Inc. and Diamondback Energy Inc. The investor added 1.1 million shares in Concho stock, while adding 2.3 million shares of Diamondback. It now controls 26.6% of Concho stock and 14.6% of Diamondback's shares. Capital Research and Management also decreased its position in EOG Resources Inc. by 5.9 million shares and Cimarex Energy Co. by 900,000 shares.

The quarter's biggest loser of institutional investors was Devon Energy Corp., which saw a net decline of more than 28 million shares held, or a 7.7% drop. First Eagle Investment Management LLC sold all 4.2 million shares it held of Devon, while BlackRock Inc. sold 11 million shares to cut its position by one-fourth. On the positive side, Fisher Investments and Two Sigma Investments LP took significant initial stakes in the company, adding 2.4 million and 2 million shares, respectively.

Apache Corp. also took a hit from institutional investors, with a net decline of shares held of 8.1 million, or 2.1%. T. Rowe Price Group Inc. sold off 5.9 million shares, followed by Invesco Ltd.'s selling of 5.6 million shares of Apache stock.

Encana Corp. was easily the most attractive stock for institutional investors in the first quarter, with an increase in net holdings of more than 26%. Wellington Management Group LLP was the biggest buyer, adding 42.9 million shares to up its position to nearly 9% of Encana stock. Causeway Capital Management LLC and ClearBridge Investments LLC added 27.2 million and 22.3 million shares of stock during the first quarter.

Marathon Oil Corp. was also a popular target for buyers, with its net institutional investor position increasing by 13.5 million shares during the first quarter. Three investment firms — Goldman Sachs Asset Management LP, Boston Partners Global Investors Inc. and Fisher Investments — bought 5 million shares or more of Marathon stock during the first quarter.