Fidelity Leads Buying Spree in Shares of Oil, Gas Producers
2003-05-20 00:26 (New York)
Fidelity Leads Buying Spree in Shares of Oil, Gas Producers
New York, May 20 (Bloomberg) -- Fidelity Investments, Capital Group Cos. and Northern Trust Corp. led a first-quarter buying spree by mutual funds that boosted their stakes in oil and natural-gas producers as energy prices rose.
Fidelity, the largest U.S. fund company, became the biggest investor in Apache Corp. as of March 31, government filings show. Capital, the third-largest fund company, bought shares of Sunoco Inc., Burlington Resources Inc. and Canadian Natural Resources Ltd. Northern Trust boosted its stake in Exxon Mobil Corp. by 60
percent to $2.89 billion.
Funds bought energy stocks as concern about war in Iraq sent oil to a 12-year high and natural gas more than doubled because of unusually cold U.S. weather. Exxon Mobil earned $7.4 billion in the quarter, the most by a U.S. company for any three-month period since at least 1990. Rival oil companies ConocoPhillips and ChevronTexaco Corp. also had record profit.
``With the end of the war in Iraq, the price of oil has stabilized, and it's clear prices aren't going to slip too much,''said Carl Domino, who helps manage $2 billion at Northern Trust Value Investors, a division of Northern Trust. ``These stocks look to be moving up with strong earnings, good cash flow and continuing consolidation.''
Northern Trust increased stakes in the 10 largest U.S. oil companies, according to filings with the U.S. Securities and Exchange Commission that were released on Thursday. The fund held 11.5 million ChevronTexaco shares, up 74 percent from Dec. 31, and doubled its ConocoPhillips holding to 6.6 million shares.
``Last year, when we thought we were going to Iraq, we
started increasing energy holdings and the stocks went nowhere, so we quit buying them,'' Domino said. ``It looks like it's time to buy again.''
Oil Prices
The oil-price rally began in December after a general strike reduced exports from Venezuela, the world's sixth-largest oil producer last year. Oil futures peaked at $39.99 a barrel in February amid concern a U.S.-led war with Iraq would disrupt supplies from the Persian Gulf, and protests in Nigeria disrupted exports.
Oil will average about $25 a barrel for the second half of the year and $21 by 2005, UBS Warburg LLC analyst Paul Ting predicted. Prices averaged about $26 last year and in 2001.
So far, most oil and gas stocks have failed to erase declines of last year.
Irving, Texas-based Exxon Mobil, the world's largest investor-owned oil company, has risen 10 percent since late January and still is 13 percent lower than a year ago. The Standard & Poor's Integrated Oil & Gas Index, which tracks six companies, is down 17 percent from a year ago.
`Add Some'
``Most of last year, oil stocks lagged and some funds might have been underweight,'' said Glen Hilton, who helps manage $40 million in energy stocks at AIM Investments, a unit of AIM Management Group Inc. ``Now they may feel they have to add some.''
AIM Advisors, another unit of AIM Management, took a new 1.13 million-share stake in ConocoPhillips and doubled its holding in gas producer Devon Energy Corp. to 1.2 million shares, government filings showed.
Revenue for energy companies rose about 45 percent during the first quarter from a year earlier, compared with 10 percent on average for companies in the S&P 500, said David Joy, vice president of capital market strategy at American Express Financial Corp.
``The energy sector was disproportionately strong,'' and companies will continue to generate more cash this year, Joy said.``Energy stocks hadn't moved much until recently, so it looks like there may be opportunities.''
American Express increased its stake in Apache by 28 percent to 2.78 million shares, boosted by 58 percent its position in Burlington Resources to 1.4 million shares, and increased its holding in Devon Energy 12 percent to 1.3 million shares.
Fidelity's Big Buy
Fidelity bought 11 million Apache shares, increasing its stake fivefold to 8.5 percent as of March 31, SEC filings showed. The shares purchased are worth about $680 million. Fidelity officials declined to comment on their holdings.
Some funds are betting on a rally in the price of natural gas, which for most of the 1990s lingered below $3 per million British thermal units on average. It now fetches more than $6 and has been above $5 almost most of this year.
Reserves of the fuel, which is used to heat homes and
generate electricity, have fallen to about half what they were a year ago, U.S. Energy Department figures show. An unusually cold U.S. winter and the failure of producers to keep up with demand may keep prices high all year, investors said.
``In an energy portfolio you definitely have to have some natural-gas exposure now,'' AIM's Hilton said. ``The usual plays are companies like Burlington, Devon, Apache or Anadarko''Petroleum Corp.
Capital Research
Capital Research acquired 9.05 million shares of Burlington Resources to become the fifth-largest shareholder, SEC filings showed. The fund more than tripled its stake in Canadian Natural Resources, Canada's second-largest gas producer, and more than doubled its holding of Apache. Capital also increased its stake in
oil refiner Sunoco.
Los Angeles-based Capital declined to comment.
Other funds that bought oil and gas stocks were American Century Investment Management, which doubled its holding in Marathon Oil Corp. to almost 5.4 million shares, and Barclays Global Investors NA, which raised its stake in Amerada Hess Corp. by 70 percent to 7.2 million shares and in Apache by 13 percent to 8.4 million shares.
--Mark Jaffe in the New York newsroom at (1)(212) 893-4159 or mjaffe3@bloomberg.net, through the Chicago newsroom (1)(312) 692-3720. Editors: Stroth, Cox, Merz, Kraus.
Story Illustration: For Apache's comparable share performance see {APA <Equity> COMP <GO>}. For a series of screens on oil companies performance and the oil and natural gas markets see {CNP 11912270214 <GO>}. To stop on a screen press the space bar, to continue hit (GO). |
