Investors have been sifting through the rubble of the oil bust in search of bargains ever since crude prices collapsed two years ago. John Goff, a Fort Worth, Texas, billionaire who made his fortune in real estate, found one.
Last year Mr. Goff began loading up on shares of Resolute Energy, a beleaguered oil producer that had so struggled it was threatened with being kicked off the New York Stock Exchange because its shares traded below $1.
Now Resolute, which drills in West Texas and Utah, is the hottest stock in the oil patch. The stock is up roughly 40% so far this week having more than tripled over the past year. Resolute’s torrid stretch comes with U.S. crude prices mired in a multiyear slump well below the $100-a-barrel it traded in mid 2014.
Resolute got a big lift last month when it announced a deal to sell pipelines in West Texas and use the proceeds to pay down debt and fund drilling in its prolific Permian Basin fields. Late Monday it said it pared its second-quarter loss, reduced drilling costs and increased its 2016 production estimates, sending shares soaring.
The company, which has scheduled a conference call to discuss the results after market, did not respond to requests for comment.
While many oil producer shares have rebounded from their recent lows, none have been as ascendant as Resolute. The Russell 2000 energy index, for example, is up about 2% over the last year.
Mr. Goff, who is chairman and chief executive of Crescent Real Estate Holdings LLC, is investing his own money in oil stocks, where he said he sees opportunity similar to the aftermath of the 1987 stock market crash. It was in that downturn three decades ago that Mr. Goff got his start investing for another Texas billionaire, the late Richard Rainwater, who assigned him $50 million with which to find stocks oversold in the market panic.
He eventually turned to commercial real estate, building Crescent into one of the world’s largest real estate investment trusts and selling it to Morgan Stanley at the top of the market for $6.5 billion in 2007. Mr. Goff regained control of Crescent’s assets when lenders foreclosed on Morgan Stanley two years later, in 2009.
“I am very bullish on oil,” Mr. Goff said. “This is one of the most interesting opportunities that I have seen in my lifetime.”
Mr. Goff said he’s been making “easier, straight-forward investment in large, well-capitalized oil companies as well as several, more strategic investments in smaller companies that at first reflection are over leveraged…but upon closer diligence have well thought out strategies to deleverage and are fortunate to have wonderful assets and management teams that can execute.”
He said he initially bought Resolute’s unsecured bonds at distressed prices and the more he studied the company, the more he liked the stock. He now owns about 10% of Resolute’s stock, which he acquired for about $7.6 million, according to securities filings. His shares are now worth about $15.4 million.
Another bet he’s made along those lines: the pending purchase of convertible preferred shares in Mid-Con Energy Partners, another producer paying down debt that Mr. Goff said is “overlooked in this market.”