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Apache (APA) is Nearing
its $100 Target
Published:
January 28, 2008
Looking back on 2007, the
benchmark S&P 500 Index delivered a modest, but hardly thrilling
gain of around +5.5%. Of course, while the broader market was
stuck in neutral, stocks in some sectors, like the energy field,
raced far ahead of the pack -- delivering robust gains of +20%,
+30%, or more.
Fortunately, readers of our premium
StreetAuthority Market
Advisor newsletter were ready and waiting, as
editor Paul Tracy had already spotlighted this group numerous
times -- covering everything from ethanol producers to Canadian
royalty trusts in previous newsletters. The December 2005 issue,
for example, featured an in-depth look at the natural gas
industry, with a specific focus on exploration and production
companies like Apache (NYSE: APA, $92.58).
After sifting through dozens of companies in this business, Paul
liked Apache for a number of reasons. First, the company's
high quality reserves and low production costs gave it an edge
over the competition, a key advantage in a commodity industry
where pricing power is negligible. Apache had also just
announced a major find in the deserts of Egypt. The discovery
was the largest in the history of the company, expanding its
gas reserve base by roughly 2 trillion cubic feet.
Yet, despite elevated natural gas prices and upbeat forecasts
projecting +60% earnings growth for the year, the shares were
still trading at just eight times forward earnings. With all that in
mind, Paul recommended the stock and pegged a target price of
$100 per share.
Since then, Apache has boosted its gas production by
double-digits, expanded its reach in South America, and raked in
nearly $80 million from the sale of its Permian Basin assets.
Meanwhile, the shares have climbed nearly +40% and are currently
knocking on the door of Paul's $100 target -- closing Friday
near $93.
In this month's
Market
Advisor, Paul explores another facet of the natural
gas industry, liquefied natural gas (LNG) -- or gas cooled to a
liquid state (-260 degrees Fahrenheit), enabling it to be
shipped in bulk quantities. Once it reaches its final
destination, LNG can be converted back to a gas and made ready
for use. LNG has become an important facilitator of global
trade. Liquid gas imports into Japan and South Korea, for
example, are almost entirely in liquid form, and the Department
of Energy projects that the U.S. will import the equivalent of 5
trillion cubic feet of LNG annually by 2030.
Better still, Paul identifies three top companies poised to cash
in on this global trend. We've already let you in on one of
these firms above. However, our
other two ideas make TGP look like child's play. One of these firms owns three
LNG re-gasification terminals along the Gulf Coast with the capacity
to place 10 billion cubic feet of gas per day into the U.S.
pipeline network. Better still, the company has already locked
up terminal use agreements with giants like Chevron (NYSE: CVX) that
guarantee hundreds of millions in annual revenues.
To read Paul's detailed report on the future boom of the LNG
industry and in-depth profiles of companies poised to gain, we invite you to
try a no-risk subscription of
Market
Advisor. To learn more, please
visit
this link.
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Nathan Slaughter
StreetAuthority Staff Writer
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