In a recent column, I proposed a ‘super spike’ in oil prices – implying a super opportunity continued to exist in the exploration and production oil companies, particularly because they’ve been underperformers on the back of recently weak oil prices.
I proposed a lack of production growth in the traditional oil areas of the Middle East as the primary cause of spiking prices, again implying that US-focused E+P’s were likely to benefit the most. In the end, only an individual assessment of E+P stocks will benefit the investor, and in this column I revisit an old favorite of mine, Apache.
Apache earned its favored status with me for having a most disciplined leadership team, as seen by their sector leading debt to total equity ratio of 0.27%. But good debt control is only one aspect of a ‘great’ E+P and not enough to deliver returns on its own.
Most important in the past few years has been the execution of production growth. Consistently rising growth numbers and the way they are generated translates most often into rising stock prices. And in this, Apache has been a mixed bag, to be sure.
Before the rise of shale production of oil and gas here in the US, Apache made strong moves to increase its production in international arenas. The most important of these areas for Apache has been Egypt, where it owns the rights to 9.4m acres. It was the disruptions caused…