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Apache: An Independent Approach to Oil

By    |   Wednesday, 27 Apr 2011 10:19 AM

Oil prices just keep climbing higher and higher, with the June contract on the New York Mercantile Exchange recently hitting a 31-month peak above $113 a barrel.

Turmoil in the Mideast and North Africa has sparked concern about supply, and demand for oil remains strong in developing nations. Many experts anticipate further price gains ahead. That, of course, means higher profit for oil companies, which should boost their stocks.

Accordingly, investors focus on the stocks of the major integrated oil companies, and rightly so. But Apache Corp. (APA), the largest independent U.S. oil and natural-gas producer by market value, also merits attention.

The company’s profit rose 15 percent in the fourth quarter, to $670 million from $582 million a year earlier. Revenue soared 31 percent to $3.4 billion. Apache’s oil and gas production averaged the equivalent of 728,657 barrels of oil a day, jumping 24 percent from 2009.

Apache’s strategy combines developing its own energy assets and purchasing those from other companies. The combination has served it well, giving the company a diversified portfolio of properties around the world, offshore and onshore. It also has an attractive mix of old assets and new ones.

In July, Apache announced plans to buy holdings from BP in Egypt, Canada and the Permian Basin of Texas and New Mexico for about $7 billion. Also last year, Apache closed its acquisition of Mariner Energy and Devon Energy’s shallow-water assets in the Gulf of Mexico.

Those deals will help the company increase its oil-and-gas output by 13 percent to 17 percent this year, Apache CEO Steve Farris told analysts on a conference call. "2011 is going to be a good year of strong production growth for Apache," he said.

Zacks Investment Research analysts are bullish on the company. Exploration-and-production corporations benefit most from rising oil prices, they note.

“One of the largest and most popular names in the space is Apache,” they write. “APA continues to trade directly below its multiyear high at $132.50. And with a forward P/E (price-earnings ratio) of just 11, a sharp discount to its peers, this growth stock also has value.”

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Oil prices just keep climbing higher and higher, with the June contract on the New York Mercantile Exchange recently hitting a 31-month peak above $113 a barrel. Turmoil in the Mideast and North Africa has sparked concern about supply, and demand for oil remains strong in...
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2011-19-27
Wednesday, 27 Apr 2011 10:19 AM
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