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World energy consumption will increase over 50% by 2035. That figure is the baseline case projected by the U.S. Energy Information Administration. As energy demand grows, so too will the opportunities in the energy market. The mega energy companies, Exxon Mobil (NYSE:XOM), Royal Dutch Shell (NYSE:RDS.A), and their peers will continue to expand, but they lack the potential for explosive growth. If you are looking to invest in the rapidly growing world energy market, and you really should, these are the companies that have the potential for surging growth, yet have the resources to defend their current claims.

An investment in one of these five companies, which have market caps ranging from $20 billion to $35 billion, is all about growth and stock price appreciation. These companies do not offer the juicy dividends that the some of the bigger guys do. Profits go right to further exploration and the development of new wells. So which of these firms have the greatest potential to pop?

The Players

Anadarko Petroleum (NYSE:APC) is certainly a hot stock right now and there's no shortage of coverage about it. Does it stand up to the hype? Its stock trades for $71, yet the company turned in a $2.65 billion loss last year. It pays a tiny dividend, which yields just 0.50%. Wall Street expects a lot from the firm however, its one-year forward price-to-earnings ratio is 13.37 and its target is $105 (a gain of 48%!). What will it take to make that happen? It must turn a 2011 loss of per share of $5.32 into earnings of $7.85 per share in just one year.

So, Anadarko lost $2.65 billion last year and spent $983 million of its reserves in 2011. Still, it still has $2.70 billion cash in the bank. Yet, it has over $16 billion in debt. What does it have to show for its huge expenditures in recent years? 2.54 billion barrels of proven oil reserves, a $400 million deal with Linn Energy to expand oil operations in its Salt Creek field in Wyoming, its new operations in the Utica Shale, new discoveries in its Heidelburg Deepwater basin, and a new natural gas plays in Mozambique. In other words, the money was well-spent.

Its Salt Creek joint venture will unlock access to an estimated one billion barrels of oil at a rate of 3,800 barrels per day. The 4,000 wells it will open in the oil field will produce oil for at least the next 28 years. Its Utica Shale operations, which began March 31st of this year, have already produced approximately 10,000 barrels of oil. In my opinion, the company is very well-positioned to grow based on its high-margin assets and has a price target of $105.

Apache Energy (NYSE:APA) is a mixed-energy play, the company is an up-and-coming player in both oil and natural gas exploration. Its stock is trading for $91 with a trailing P/E of 7.97 and forward P/E of 6.50. Its price target of $132, which figured off forward P/E, works out to projected earnings of over $20 per share, versus $11.46 now. Apache pays a small dividend yielding 0.70%. The company posted a $4.5 billion profit last year and $3 billion in 2010. It added $161 million to its cash reserves and has a balance of $295 million, but Apache has substantial debts totaling $7.22 billion.

Apache has a 12.5% stake in the 1,500 new acres in the Heidelburg Deepwater Sidetrack, compared with Anadarko's 44.25% stake. Egypt is the firm's darling however. Its oil fields in the Faghur Basin produce over 7,000 barrels of oil and 9.5 million cubic feet of natural gas every day. Its low cost of production in Egypt has helped the company realize a profit margin of 27.50%. Apache has oil reserves approach 3 billion barrels, but the Houston firm is maintaining a diversified energy portfolio. Its recent natural gas moves include the opening of a compressed natural gas fueling station in Tulsa on April 3rd and a deal to sell liquefied natural gas through Chevron's Wheatstone plant located in Australia. It also controls 55% of the Devil Creek gas plant recently opened in Western Australia in a joint venture with Santos Ltd.

EOG Resources (NYSE:EOG) has operations in the U.S., Canada, Argentina, China, Trinidad, and Tobago, and the UK's North and East Irish seas. Its stock trades for $104 on a trailing earnings multiple of 25.48 and a forward ratio of 15.34. Its earnings are expected to double in the next year from $4.10 share to about $8.50. It also offers a small dividend of $0.70. EOG posted stellar year-over-year revenue growth of 53% during the first quarter of 2011. It earned $1.09 billion last year, but spent $173.13 million of its cash reserves. The company has cash totaling $616 million and debt of $5 billion.

Its relatively small profit margin, compared to its peers, of 12% percent is a bit discouraging. EOG's projects are high-cost in nature and will limit the potential for future and make its consensus target of $129 unreasonable. I predict in one-year that company trades at a P/E of around 13 with a price of $118. Those numbers still offer capital gains of 13%.

Devon Energy (NYSE:DVN) penned a $2.2 billion deal with Sinopec in January through which the Chinese oil giant will receive one-third share in five of Devon's ventures. The projects included in the deal are Devon's Tuscaloosa Marine, Niobrara, Mississippian, Ohio Utica, and Michigan Basins. In return, Sinopec will cover Devon Energy's drilling costs in the region, increasing its margins. The firm already has a phenomenal profit margin of 44.50%.

The company's stock is valued at $67 per share on a trailing P/E of 5.91. It earnings came to $11.31 per share in 2011, but are expected to fall to $9.59 per share this year. The company pays a small dividend of 1.20%. Devon is a very profitable company, with net income of $4.70 billion in 2011 and $4.55 in 2010. Its cash hoard increased by $2.2 billion in both years, making for a total of $7.09 in the bank versus $9.78 billion in debt. The growing cash stash may be used to pay off debts, a move that may ultimately result in higher dividends. I do not believe Devon will become a rapid-growth, high leverage firm like Apache or Anadarko. I also reject its consensus price target of $90. I believe investors will continue to ignore this firm due to its slower growth. I'm looking for a P/E of 7 next year which, on the predicted EPS of $9.59, makes for a stock price of $67, right where the stock trades today.

Last on the list, Marathon Oil (NYSE:MRO) is relatively unexciting stock. The company split its operations last year, keeping the "sexier" business of oil exploration to itself and moving its transportation and marketing to the new Marathon Petroleum (NYSE:MPC). Transparent pricing in the oil industry has decreased the need for vertical-integration in the energy sector and Marathon clearly believes it can be more nimble with this move.

So far, not much has changed, the company posted net income of $2.95 billion in 2011 compared to $2.57 billion in 2010. Its stock trades for $29 per share with earnings $4.13. Its trailing price-to-earnings is 7.12 and its forward P/E is 6.62. The company pays the largest dividend in this bunch, yielding 2.30%. The company post negative cash flows of $3.4 billion last year, but still holds $639 million in cash. I'm not too optimistic about this company as far as explosive growth. Marathon has some new operations in North Dakota's Bakken field and the Texas Eagle Ford. It is also expanding Gulf operations. However, the company is targeting just 5% production growth through 2012, a drop in the bucket compared to Apache's and Anadarko's ultimate ambitions.

Conclusion

I like Apache the best of these five, followed by Anadarko. These two companies offer a wonderful investment opportunity and rapidly expanding profits will send their stocks soaring. Apache really shines with its somewhat stronger balance sheet and diversified portfolio. Marathon Oil may be a nice dividend play, but is not much of a growth stock. EOG has little upside and Devon, in my opinion, has no upside potential. Pick up Anadarko and Apache, just be careful to manage the higher risk these firms carry.

Source: 2 Hot Oil And Gas Stocks Ready To Leap On New Assets