Decades of importing crude from the vast Arabian deserts left many people believing that America's dependence on foreign oil was as inevitable as the tide. But sweeping changes in the way oil and gas are extracted are challenging that assumption.
As anyone who has seen the classic 1956 film "Giant" or the TV series "The Beverly Hillbillies" knows, drilling for oil in America is as old as the hills. But that history means that opportunities for land-based drillers are limited. "The largest onshore oil fields have been developed," says Todd Scholl, an analyst at Wunderlich Securities. "All the low-hanging fruit is gone."
Most offshore producers also have onshore operations. We've identified two companies with major water-based projects that are certain to play a key role in their growth.
One of them is Anadarko Petroleum (symbol APC). Some of its most promising projects are located in the Gulf of Mexico and off the shores of Brazil, Colombia, Kenya and Mozambique. Analysts praise Anadarko for its skill in finding large-scale discoveries at a low cost. At $97, the stock sells for 18 times projected earnings -- not terribly expensive in view of Anadarko's expected long-term earnings growth rate of 22 percent.
The other company, Apache Corp. (APA), has gone through a rough patch over the past couple of years. Shares of the Houston exploration firm, which peaked at $133 in April 2011, sank to $69 two years later, thanks to a combination of low gas prices and operational missteps. Investors also fretted that political instability would derail Apache's joint ventures on some 10 million acres in Egypt. But Apache launched an aggressive restructuring program this year, selling off one-third of its Egyptian assets as well as fields in Canada and the Gulf of Mexico. It is using the $7 billion in proceeds to pay off debt and buy back shares.
Apache says that recently completed wells in the North Sea contributed 16 percent of the company's worldwide production revenue in 2012. The firm is also developing projects in Alaska's Cook Inlet and off the shore of Australia. At $90, the stock is cheap, trading for just 12 times projected profits.
(Kathy Kristof is a contributing editor to Kiplinger's Personal Finance magazine. Send your questions and comments to firstname.lastname@example.org. And for more on this and similar money topics, visit http://www.Kiplinger.com.)
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