Anadarko Petroleum Corporation (APC), Noble Energy, Inc. (NBL), Murphy Oil Corporation (MUR): Which Large-Cap Domestic E&P Play Should You Bet On?

My top pick: Cheap valuation and huge potential growth.

Murphy Oil Corporation (NYSE:MUR) is a worldwide oil and gas E&P company with retail marketing operations in the US and the UK. With 600 mmboe of proved reserve and 200 mboed of production, it’s my favorite pick among this group of three large–capitalization E&P corporations.

For the first quarter of this year, Murphy Oil Corporation (NYSE:MUR) continued to show improved performance. Its adjusted 1Q 2013 earnings were $208 million, or 11% above consensus. EPS declined by 27% year-over-year and 48% sequentially, but the reasons for the decline in EPS — dry holes in the Muskwa Shale and a work-over in the Congo — should not be repeated going forward.

Murphy Oil Corporation (NYSE:MUR) is increasing its Eagle Ford production and funding its deep-water exploration activities while maintaining one of the strongest balance sheets in the E&P industry. Given its small (and profitable) asset base, good exploration results could have a huge impact on the company’s future operating results. Besides, the company remains on track to spin-off its US retail business later this year, which should help the performance of its shares.

Significantly cheaper than its peers in the large E&P space and with a very low debt ratio, Murphy Oil Corporation (NYSE:MUR) trades at 2013 12x P/E and 4x P/CF multiples. Paying a 2% cash dividend yield, Murphy Oil Corporation (NYSE:MUR) is my top pick among this group of three companies.

Bottom line

The three companies above will benefit enormously from the US shale energy revolution – and from Israel’s offshore shale gas revolution in the case of Noble Energy, Inc. (NYSE:NBL). That said, and as I always say:  “Price is what you pay and value is what you get.” There is a price for everything, and Murphy Oil Corporation (NYSE:MUR) is the best price-adjusted option.

The article Which Large-Cap Domestic E&P Play Should You Bet On? originally appeared on Fool.com and is written by Federico Zaldua.

Federico Zaldua has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Federico is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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