Apache – strong balance sheet and cheap valuation
At the end of 2012, Apache Corporation (NYSE:APA) had total proved reserves of around 2.9 billion BOE, and around 28% of its total proved reserves were in the Permian Basin and 19% was in Canada. In the first quarter of 2013, Apache Corporation (NYSE:APA)’s revenue experienced a decline of more than 10% to $4 billion while net income came in at $698 million, or $1.76 per share, lower than net income of $778 million, or $2 per share in the first quarter last year. In the first quarter, the company managed to increase global production to nearly 782,000 BOE per day, mainly attributable to a 45% rise in North American onshore liquids output.
What makes Apache Corporation (NYSE:APA) interesting is the plan to divest as much as $4 billion in assets by the end of 2013. The company would use $2 billion of proceeds to pay down the debt and the remaining $2 billion to buy back its shares. The company is focusing on a much stronger balance sheet although it already has a conservative capital structure. As of March 2013, it had nearly $32 billion in equity, $248 million in cash, and nearly $12.5 billion in total debt. At $84.40 per share, Apache Corporation (NYSE:APA) is worth nearly $33 billion on the market. The market values the company quite cheaply at only 3.72 times EV/EBITDA.
Devon – undervalued by the market
Devon Energy Corp (NYSE:DVN) focuses its operations in North American onshore, with total proved reserves of more than 2.96 billion BOE at the end of 2012. Most of its proved reserves, more than 1 billion BOE, or 35.7% of the total proved reserves, were in Barnett Shale in the U.S. The Canadian Oil Sands ranked second, with 528 million BOE in the total proved reserves. What I like about the company is its aggressive divestment of the international and deepwater assets. Fool contributor Daniel Miller wrote that the company has divested around $10 billion in assets, and its recent focus on U.S. and Canadian assets hasn’t been recognized by the market.
Like Apache, Devon Energy Corp (NYSE:DVN) has quite a strong balance sheet. As of March 2013, it had more than $19.7 billion in total stockholders’ equity, $6.5 billion in cash and short-term investments, and $12.2 billion in both long and short-term debt. Devon Energy Corp (NYSE:DVN) is trading at around $60.20 per share with a total market cap of nearly $24.5 billion. The market values Devon Energy Corp (NYSE:DVN) at around 6.53 times EV/EBITDA.
Chesapeake – where a lot of investors are bullish
Another energy company that investors should keep their eyes on is Chesapeake Energy Corporation (NYSE:CHK). With around 15.70 tcfe in its total proved reserves, Chesapeake Energy Corporation (NYSE:CHK) is considered to be one of the largest U.S. natural gas producers. The company has been selling its non-core assets in order to pay down its debt. In the first quarter, the company announced that it had sold around $2 billion of its assets. Chesapeake has set a goal of $4 billion to $7 billion asset divestment within this year.
Indeed, as Chesapeake Energy Corporation (NYSE:CHK) owns great natural gas assets, it is in the holdings of many investors including Carl Icahn, Mason Hawkins, and Mohnish Pabrai. Recently, another focused value investor, Bruce Berkowitz, also accumulated around 13.4 million shares in the company, accounting for nearly 3% of his total portfolio. Chesapeake Energy Corporation (NYSE:CHK) is trading at around $20.80 per share with a total market cap of $13.9 billion. The market values Chesapeake Energy Corporation (NYSE:CHK) at around 5.8 times EV/EBITDA. At the current trading price, Chesapeake offers investors a dividend yield of 1.70%.
My Foolish take
Indeed, all three energy companies, with great oil/gas assets, could fit well in the portfolios of investors. All three companies also offer dividends with yields ranging from 1% to 1.70%. Among the three, I like Chesapeake Energy Corporation (NYSE:CHK) the most with its leading position in U.S. natural gas. Its strategy to divest its non-core assets could bring to its shareholders a lot of value in the near future.
The article 3 Opportunistic Energy Stocks for Your Portfolio originally appeared on Fool.com and is written by Anh Hoang.
Anh HOANG owns shares of Chesapeake Energy. The Motley Fool owns shares of Apache and Devon Energy and has the following options: Long Jan 2014 $20 Calls on Chesapeake Energy, Long Jan 2014 $30 Calls on Chesapeake Energy, and Short Jan 2014 $15 Puts on Chesapeake Energy. Anh 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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