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Big investors divided on Permian producers in Q2 as pipe constraints emerged

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Big investors divided on Permian producers in Q2 as pipe constraints emerged

Even as the price of oil increased through the second quarter, institutional investors were lukewarm on major Permian Basin producers, which have sent oil and gas output soaring but face pipeline constraints to get the product to market. Capital Research and Management Co., however, was a big buyer.

Six companies out of a group of 11 large operators focused on the Permian in West Texas saw a decrease in ownership by large institutions during the second quarter, according to data from SEC filings compiled by S&P Global Market Intelligence.

The biggest winner among institutional investors was Concho Resources Inc., which saw the big holders increase their stakes by more than 10 million shares, or 6.3%, in the second quarter. The largest buyer was Capital Research and Management, a subsidiary of Capital Group Cos. Inc., which increased its stake by more than 14%, or nearly 5 million shares, during the quarter. Capital Research and Management also ramped up its positions in Permian producers Pioneer Natural Resources Co., Cimarex Energy Co., EOG Resources Inc. and Diamondback Energy Inc. to the tune of 25.5 million net shares. At the same time, it dumped nearly all of its Apache Corp. stake in the quarter.

TIAA was Concho's biggest net seller, cutting its stake in the company by 1.1 million shares, or more than 21%. After the second quarter ended, Concho closed its $9.5 billion acquisition of fellow driller RSP Permian, making it the biggest producer in the West Texas shale play.

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Institutional investors increased their holdings in Cimarex, another Permian-only operator, by 3.7 million shares in the second quarter. Boston Partners Global Investors Inc. added 3.4 million shares on its own during the quarter, increasing its stake in Cimarex by nearly 212%. On the other side of the ledger, Viking Global Investors LP sold all of its 800,000 shares in the company.

Boston Partners was also the largest institutional buyer in Marathon Oil Corp., picking up 16.7 million shares and increasing its holdings in the company by nearly 475%. Meanwhile, Hotchkis And Wiley Funds sold approximately 8.7 million shares of Marathon stock during the quarter, cutting its stake by 22%.

Standard Life Investments Ltd. showed a strong interest in Occidental Petroleum Corp., adding 7 million shares, or an increase of more than 42,000%. But the company saw institutional investors decrease their stake by 5.7 million shares overall, led by Lyxor International Asset Management SA selling more than 97% of its holdings, or 3.9 million shares.

One company that Capital Research and Management was not fond of was Apache, which has increased its emphasis on the Permian in recent years. The investment firm sold 12.5 million shares, or 96% of its stake, in the company during the second quarter. That was a major cause in Apache seeing stock held by institutional investors drop by approximately 4.5 million shares during the quarter.