5 Oil & Gas All-Stars You Shouldn't Ignore

Jul.16.12 | About: Chevron Corporation (CVX)

When we look at oil and gas stocks, what we like to see is an indication that those companies are interested in exploring and finding larger reserves of oil and gas resources. This will boost their market capital and their stock options, provided exploration activities are successful. Let's look at the fortunes of Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX), Kosmos Energy (NYSE:KOS), Anadarko Petroleum (NYSE:APC), and ATP Oil & Gas (ATPG).

Exxon recently indicated that it is interested in conducting exploration activities in Afghanistan. So far this is nothing more than an indication, however, as the company is looking into various oil and gas exploration options across the world. The company officially filed its expression of interest in the area and will be competing against other companies that may also be bidding for the right to explore there. Exxon has been up lately (3.5% in the last month) perhaps as a partial result of this news. Although the news that the company may explore in Afghanistan may not pan out so well, the company's indication that it wants to explore in general is a very positive one for its market capital and for shareholders. At the moment, Exxon gives a dividend and yield of 2.28 (2.70%). Its earnings per share sits at a remarkable 8.28, so that should give investors something to think about.

Kosmos Energy is exploring in Suriname and has recently joined forces with Chevron. According to the terms of the deal, Chevron will have a 50% interest in two exploration blocks licensed to Kosmos Energy (specifically Blocks 42 and 45). In addition to this 50% interest, Chevron will also develop any commercial resources that are found during the exploratory activities. Kosmos will hold its position as the operator of the two blocks until exploratory activities reach a conclusion. Drilling in Suriname should begin at some point in the year 2014. Giving up 50% of its interest in the blocks is an interesting move on Kosmos' part, especially as this represents the first move that the oil and gas company has made outside of Africa. Perhaps the reason for this is the fact that shares in Kosmos have declined drastically over the last year, from about $17 to under $11. And, with a market cap of only $4.2 billion, the company is not really one that is able to compete at a significant level unless it does collaborate with companies such as Chevron. So, in my opinion, Kosmos shares will improve as a result of this collaboration, even if it takes time for us to see this improvement. In addition, share prices in the company peaked when the news of its interest in the Suriname blocks was announced. Although Kosmos is the main proprietor of the blocks, Chevron stock may benefit more obviously and more quickly.

Anadarko has supposedly signed an agreement with the Guyanan government to explore in a new deepwater lease. New exploration endeavors are generally a good thing for a company the size of Anadarko, but as there is no information at this point on Anadarko's website and as we have no further information about the exact location of the deepwater lease, it is difficult to guess what effect this will have on Anadarko stock. Depending exactly where the area is in which the exploratory activities will take place, this is either a good move or a bad move as some areas are likely to yield higher returns than others. With too little information to go on there is no clear indication of what effect this will have on the stock. Anadarko stock has declined considerably of late and the company is currently trading at about $66, down from around the $80 mark where it began 2012. The company could certainly use the boost, the question is whether this deal might help with that.

ATP is exploring in the Shimshon well in the Mediterranean Sea and recently it announced that it has met with some considerable success in the area. The well "encountered more than 62 feet (19 meters) of natural gas pay in the Bet Guvrin sands. The Shimshon well is in a water depth of 3,622 feet (1,104 meters) and was drilled to a subsea depth of 14,445 feet (4,403 meters)". We will hear more about this in the third quarter of this year.

For now let's have a look at some of ATP's numbers. ATP has recovered from a low of $15 on June 26 to over $20. This could be due directly to the fact that the company has had some success in Shimshon. If this is the case, we can expect to see further increases in the stock over the very short-term future. However, since the beginning of the year, the company stock has declined noticeably from its record high in April of $55. Hopefully this marks the beginning of a full recovery for the stock and that the company will soon be competing at the same level that it was when it first entered the game as a serious player.

The oil and gas industry is as busy as ever. This is always a good thing for investors, though the question remains as to which exploration development may prove to be the most fruitful. I like ATP's news, though the stock may have already suffered too much to come back from. The other larger companies, Exxon and Chevron, are certainly no strangers to leveraging their strength in exploration, and they might be the best plays right now. Chevron has trended higher in the last couple months, and I can see the stock going up in the coming quarters.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.