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How this top US fund is playing the shale boom in 7 stocks

on Apr 17, 2014 at 12:26

Oceaneering International provides equipment, such as remote-operated vehicles (ROVs), to deep-water and subsea drillers. The company is positioned to benefit from a strong increase in subsea and deep-water exploration and production activity, which is likely to continue well into the foreseeable future.

The company is also poised to take advantage of increased safety regulations, which may require additional ROVs per deep-water rig.

Halliburton

Halliburton provides products and services to energy exploration and production companies. It has been shifting from an emphasis on providing equipment – to more intelligent, technology-driven services. Equipment on site, fleet maintenance, vehicle counts and crew sizes are all reducing – while well efficiencies are increasing.

The stock is trading attractively relative to historical multiples. Meanwhile, we see improving margins as prices for a key input have collapsed. Competition in the North American fracking market should abate as marginal players operate below break-even levels, whereas Halliburton is holding the line on prices.

Devon Energy

Devon Energy is engaged in oil and natural gas exploration and production, primarily in the US and Canada. We see improving fundamentals as it transitions to more lucrative oil and liquids production.

Devon has built a lot of momentum in the Permian Basin, which is its primary source for increasing oil production. It recently spun off and merged its midstream operations with Crosstex, unlocking a significant amount of value. While it previously traded in line with peers, midstream assets generally call for a higher multiple due to more stable cash flows.

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