Marathon Oil Corporation (MRO), Anadarko Petroleum Corporation (APC), Southwestern Energy Company (SWN): Energy Companies – Top 3 Volume Gainers

With all of that said, I would rather have Marathon as an investment. First of all, Anadarko’s volumes are far less liquids-rich (57% gas, 32% oil, 11% NGLS) but, most importantly, because the valuation is much richer. Anadarko trades at 2013 20x P/E and 5x price to cash flow. Besides, the company pays an extremely low 0.4% cash dividend yield.

A pure gas bet somewhat over-priced

Southwestern Energy Company (NYSE:SWN) is a pure US onshore gas play and the one with the highest production growth rate in the country. The company has a high capital discipline and one of the lowest cost structures within the industry. Southwestern Energy Company (NYSE:SWN)’s volumes rose 11% year-over-year despite having fallen by 1% sequentially. The company‘s operating strengths are matched by its rich valuation which, in part, can be explained by the potential earnings boost that could come from higher US gas prices.

As the US becomes a net gas exporter, local gas prices should surge making Southwestern Energy Company (NYSE:SWN)’s earnings soar. But, even if higher gas prices are almost certain for the future, the market shall remain oversupplied for at least the next two-to-three years. With that in mind, I think Southwestern Energy Company (NYSE:SWN), which trades at 2013 19x P/E, 7x price-to-cash flow and pays no dividend, looks relatively expensive.

Bottom line

The three stocks above have great prospects. Not only do they represent the equity side of successful exploratory firms with great management teams but also because the US E&P industry will be one of the most prone sectors to M&A in the years to come.

The US is going through an energy revolution that is changing the world energy map much faster than many thought possible. It is extremely relevant to have an eye on the sector and these three companies should be on your list of firms to follow. That said, its also relevant to have valuations in mind. As a result, I think Marathon represents, at current market prices, the most compelling company within this group of three.

The article Energy Companies: Top 3 Volume Gainers originally appeared on Fool.com.

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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