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Big investors boost North American shale oil holdings as drillers tighten focus

As institutional investors incrementally increased their collective stake in the top independent North American shale oil producers in the third quarter, they also showed they were still not "all in" on companies operating largely in the booming Permian Basin of West Texas.

The third quarter was a mixed bag for Noble Energy Inc., as it tightened its focus to high-producing wells in Texas' Delaware Basin and Eagle Ford Shale and the Colorado-centered DJ Basin and beat estimates with a smaller-than-expected loss.

"[Noble] shares trade at a 5% discount to peers on 2019E pre-interest cash flow despite a vastly improved US tight oil asset base and high quality Israel assets. Strong tight oil momentum, including Delaware acceleration, should boost the shares," Barclays analysts said in a Nov. 16 note. It appears that at least some institutional investors agreed, as they increased their stock holdings in Noble by nearly 13 million shares during the quarter, according to S&P Global Market Intelligence's analysis of SEC Form 13-F filings.

Vanguard Group Inc. was the biggest buyer of Noble stock, buying up 11.5 million shares during the third quarter to lift its overall holdings in the company to 10.4% of shares outstanding. On the other side of the ledger, Oppenheimer Funds Inc. divested all 3.2 million of its shares in the company during the third quarter.

The biggest mover among the top 10 North American independent shale oil producers was Encana Corp., which saw institutional investors increase their holdings by 20.3 million shares during the quarter. Viking Global Investors LP increased its position in the company by adding 20.6 million shares to place its total holding at 9.6% of company stock. Previously on the sidelines, PointState Capital LP bought into Encana to the tune of 13.6 million shares, or 1.4% of company stock.

Continental Resources saw the biggest decline in institutional holdings among the group, with those investors giving up a net 2.9 million shares. Renaissance Technologies Corp. sold all of its 2.9 million shares in Continental, while Point72 Asset Management LP dropped nearly 77% of its stock in the company. On the positive side, two new investors — Brenham Capital Management L.P. and Alyeska Investment Group L.P. — bought a combined total of 4 million shares worth more than $153 million during the quarter.

Permian-heavy producer Pioneer Natural Resources Co. also saw its institutional investor base slip, dropping by 0.6% or 1 million shares. The three biggest sellers — FMR LLC, Capital Research and Management Co., and Wellington Management Group LLP — all retain significant holdings in Pioneer in spite of selling a combined 3.4 million shares during the third quarter. Meanwhile, Highfields Capital Management LP bought a new stake in the company, adding 2.8 million shares worth nearly $411 million during the third quarter.

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