January 20, 2010 / 2:14 AM / 8 years ago

UPDATE 3-Natgas bets help Pickens recover lost billions

* Pickens recovers from his losses

* Net worth dropped 66 percent

* Texas tycoon goes long natural gas futures

* Investing in potential takeover targets

* Sees U.S. oil prices rising to $90 in 2010, $100 in 2011 (Updates with interview, adds byline)

By Joshua Schneyer and Edward McAllister

NEW YORK, Jan 19 (Reuters) - T. Boone Pickens, the 81-year old Texas energy tycoon, is recovering from major losses he incurred in oil and equities trading in 2008, by betting on a gradual rise in natural gas prices as the United States moves toward cleaner fuels.

In an interview Tuesday, Pickens said his net worth, which rose to $3.5 billion in 2007, plunged by two-thirds in 2008 to as little as $1.2 billion, a loss he called “a serious bruise.”

Oil prices hit a record near $147 a barrel in mid-2008, but later fell by up 77 percent, battering investors who were expecting further increases.

Since 2008, Pickens’ net worth has grown by 25 percent to 30 percent, he said, and funds controlled by his BP Capital management are also on the rise, after betting on commodities like natural gas.

Benchmark U.S. natgas prices NGG0 have more than doubled to $5.60 per million British thermal units since they fell to seven-and-a-half-year lows near $2.40 per mmBtu in July.

Pickens now hopes that U.S. energy legislation will mandate a major shift to natgas as a vehicle fuel, helping to wean the United States off its dependence on foreign crude, including around 5 million barrels a day from OPEC countries.

U.S. lawmakers introduced legislation in July that would provide incentives for the use of vehicles fueled by natural gas. The bill, which Pickens supports, could be passed with climate or energy legislation this year..

“I think that legislation will pass before Memorial Day (May 31),” he predicted.

Pickens said rising demand for gas should nearly double the commodity’s price to around $10 per mmBtu by 2013, but ample supply of unconventional, U.S. shale gas could limit any natgas rise this year, to around $6.50 per mmBtu.


    That may also bolster Pickens’ recent equity investments.

    A legendary corporate raider in the 1980s, Pickens said he’s positioning his funds to benefit from more potential mergers and acquisitions in the U.S. oil and gas sector, after ExxonMobil (XOM.N) said in December it planned to buy XTO Energy XTO.N, a U.S. gas driller, in a deal worth $41 billion.

    “Exxon and XTO, I love the deal,” Pickens said. “I think you are going to see activity that is similar to Exxon-XTO.”

    Pickens’ BP Capital’s top holdings in its latest SEC filing included Devon Energy (DVN.N) and Chesapeake Energy (CHK.N), two U.S. companies which, like XTO XTO.N, have large roles in U.S. shale gas production, as well as deepwater driller Transocean (RIG.N), and large independent U.S. oil and gas companies Hess (HES.N) and Occidental Petroleum (OXY.N).

    “All of them that are heavily endowed in the (gas) shale play are going to be looked at by the majors,” he said.

    The United States is estimated to have some 2,000 trillion cubic feet of technically recoverable natural gas reserves, or enough gas at current production rates to supply the country for more than 90 years.

    “I‘m long natural gas, not in 2010, but out beyond 2010,” he said. “As economic recovery occurs, demand will go up for natural gas. It is going to happen, it is just going to take a little while to get there.”

    But the Texas investor has scaled back earlier plans to make huge investments in wind farms for power generation, such as a $10 billion plant he planned to build in the Texas Panhandle. Pickens said he may revisit the investment when more transmission lines are built in Texas. He is planning to build much smaller wind plants in Canada and Minnesota, starting in 2011. (Reporting by Joshua Schneyer, Edward McAllister; additional reporting by Rhonda Schaffler; editing by Leslie Gevirtz)

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