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When one considers an “oil and gas stock,” one's mind often directs toward the large, integrated behemoths like Exxon Mobil Corp. (NYSE:XOM) or British Petroleum, PLC (NYSE:BP). These types of companies handle all aspects of the petroleum business, from “upstream” exploration and production, to “downstream” refining, transporting and retailing the finished product. But many companies specialize in either upstream operations or downstream, but not both. This focus often results in a more nimble and responsive company. I will analyze five of the largest independent companies, looking for value and growth prospects.

Anadarko Petroleum Corp. (NYSE:APC)

APC is a leading, independent oil and gas exploration company. Its stock was trading recently at about $80 per share, near the upper end of its 52-week range of from $85.50 to $57.11. It has a market capitalization of about $40 billion and no P/E as it has lost money. It pays an annual dividend of $0.36, for a yield of 0.40%.

APC had been under a very dark cloud. It had been the 25% owner of the project that later became known as the Deepwater Horizon drilling rig, which exploded in April, 2010, starting a catastrophic, months long oil leak. British Petroleum, PLC (BP) was and is the majority owner of the project, and sought $6 billion or more from APC. The matter was settled October 17, 2011, for $4 billion dollars, which equaled a one time, $6.78 hit against third-quarter earnings. As a result, APC posted a loss of $6.12 per share in the third quarter. But at least that cloud is behind the company.

The funds for the settlement will come from APC's formerly generous cash hoard of $3.5 billion, along with available credit. But now APC is interested in replenishing its cash position by selling either of its valuable properties in Mozambique or Brazil.

APC is a fine company, but is in such a state of flux right now I cannot see making a commitment to it.

Valero Energy Corp. (NYSE:VLO)

VLO is the country's largest independent oil refiner and marketer. It operates 15 refineries worldwide, 10 ethanol plants in the Midwest, and owns or leases some 7,000 retail outlets. It was trading recently at about $22 per share. Its 52-week range is from $31.12 to $16.40, and its market capitalization is nearly $12.5 billion. It has a P/E of 7.9, and pays an annual dividend of $0.60, for a yield of 2.6%

In third-quarter 2011, VLO hit its stride. Profits were up nearly fourfold from the year earlier period to $1.2 billion, or $2.11 per share. The company attributed the results on account of stronger pricing and production efficiencies. The quarter also represented VLO's strongest quarter since 2007.

VLO is taking additional measures to ensure long-term health. It bought from Chevron Corporation (NYSE:CVX) a refinery and related assets in Wales for some $1.7 billion in March, 2011. More recently, VLO made a $59 million investment in Enerkam, a Canadian company working to convert trash to fuel.

Despite all the good news coming from VLO, its margins are not the best. Its operating and profit margins are 3.5% and 1.4% respectively, far below similar competitor Tesoro Corp's (NYSE:TSO) margins of 4.6% and 2.4%.

I believe VLO's investments in new markets and efficiencies will yield results, and that VLO is a suitable long term buy for many investors.

Marathon Petroleum Co (NYSE:MPC)

MPC is one of this country's leading refiners and marketers of petroleum products. For a bit of background, a year ago, Marathon Oil Company (NYSE:MRO) was one of the country's largest integrated oil companies. On June 30, 2011, MRO spun off to shareholders its refining and marketing operations as a separate, independent company, MPC. The slimmed down MRO remains, but is strictly an explorer and producer of petroleum products. Competitor Conoco Phillips (NYSE:COP) plans the same sort of split up in 2012.

MPC has been trading recently at about $34 per share. Its range since June 30, 2011, has been from $47.43 to $26.35, and its market capitalization is just over $12 billion. It has a P/E of 4.5, and raised its dividend to $0.25 per share, for an annual yield of 2.9%.

In third-quarter 2011, MPC reported income of $1.13 billion, or $3.16 per diluted share. This was up some fourfold from MRO's refining and marketing division’s profits of $277 million in the third quarter of 2010. MPC also boasts a strong balance sheet, with $3 billion in cash, and untapped revolving credit facilities.

The ability of MPC's management to focus exclusively on downstream activities will undoubtedly help. This stock is selling for an almost absurdly inexpensive price relative to its earnings, and there is very likely much more upside than downside in the issue at this time. I encourage further research.

Noble Energy, Inc. (NYSE:NBL)

Noble Energy is another leading oil and coal production company, with operations in four continents. Its shares were trading recently at about $96, near the high point of its 52-week range of from $101.27 to $65.91. It has a market capitalization of roughly $17 billion, and a P/E of 21.5. It currently pays an annual dividend of $0.88, for a yield of 0.9%.

In third-quarter 2011, NBL reported income of $441 million, or $2.39 per share. This was nearly double the year-ago quarter when the company earned $232 million. During the quarter and year in general, NBL took measures to ensure longer term viability. It spent over $3 billion to form a joint venture with Consol Energy, Inc. (NYSE:CNX) that will develop some 630,000 acres of the Mercellus Shale Formation. NBL also has made a substantial find that it working to develop off Israel's coast in the Mediterranean Sea.

NBL has a lot going for it, perhaps even too much, and its capital needs will be intensive in order to take advantage of its recent finds. It is likely, I believe, that the venture with CNX will proceed slowly as long as natural gas prices are low. Analysts are generally in favor of this issue, with a mean rating of 2.0. My biggest concern is NBL's price and frothy P/E. I would urge to look for price pullbacks before buying.

Pioneer Natural Resources Company (NYSE:PXD)

PXD is another upstream, drilling and production based company, only it has a smaller footprint than other companies in this article in that most of its activities are in the United States. Its stock was trading recently at about $92 per share, near the top of its 52-week range of from $106.07 to $58.63. It has a market capitalization of nearly $11 billion, and a P/E of 20.5. It pays an annual dividend of $0.08, for a yield of 0.1%.

In third-quarter 2011, PXD reported net earnings of $351 million, or $2.95 per diluted share. However, unrealized mark-to-market realizations on derivatives accounted for a large percentage of that profit amount. Excluding the accounting gains, PXD recorded profits of $160 million, or $1.35 per share. Even that was significantly better than the same quarter of 2010, when PXD reported profits of $0.94 per share.

PXD has many development projects in place, and its capital expenses have exceeded its cash flow. In January, 2011, PXD sold its interests in Tunisia for $866 million, and in November, 2011, PXD issued a 5.5 million share secondary offering of its common stock. Such measures to raise cash through selling secondary assets and related measures may continue for some time.

PXD's high beta of 1.54 and its high current valuation give me pause. There are better values elsewhere in this article.

Source: 2 Undervalued Oil And Gas Stocks To Buy, 3 To Avoid For Now