Advantage Oil & Gas Ltd (USA) (NYSE:AAV)
Perhaps a company like Advantage doesn’t get its due because all of its operations take place in Canada, but it doesn’t preclude the fact that this company is valued at a bargain basement price of $1.20 per thousand cubic feet of gas. This modest $1 billion natural gas company is located right in the heart of the Montney Shale play in Alberta, and although the company touts just under 1 trillion cubic feet equivalent in proved reserves, the company believes its assets in the Montney hold over 10 trillion cubic feet equivalent.
A company like Advantage should be right in the wheelhouse of integrated oil and gas giants. It is an undeveloped producer with favorable assets in a shale play that could contain enough gas to supply North America for over a century. A company like Exxon, which just completed a deal for Celtic Exploration, a company similar to Advantage, should be familiar with the potential of companies in this region.
WPX Energy Inc (NYSE:WPX)
Of all the independent oil and gas companies out there, you will be hard pressed to find a company that is valued as low as WPX. Right now, the company is valued at exactly $1.00 per thousand cubic feet equivalent. Of all the companies that fit the parameters mentioned above, it has the lowest price. What also sets this company apart from the other two on this list is that it has a decent liquids profile as well: 27% of its reserves are in oil and natural gas liquids, and the location of these assets are pretty attractive as well.
Despite oil only being 12% of the company’s proved reserves, those reserves come in one of the premier unconventional shale plays in the U.S.: the Bakken. Its 80 million barrels of proved reserves are equal to the reserves of Kodiak Oil & Gas Corp (USA) (NYSE:KOG), yet WPX is valued at one-sixth the value of Kodiak. Granted, the lower price tag is mostly from the gas assets on the books, but WPX has strong positions in the Marcellus, Niobrara, and the Piceance Basin, possibly part of the largest source of oil in the world.
What a Fool believes
Using the enterprise value per thousand cubic feet equivalent is a shortcut method for evaluating a company. While it can be effective for quickly pointing out potentially undervalued companies, it should not replace a more thorough analysis.
The article 3 Attractive Natural Gas Acquisition Targets originally appeared on Fool.com and is written by Tyler Crowe.
Fool contributor Tyler Crowe has no position in any stocks mentioned. You can follow him at Fool.com under the handle TMFDirtyBird, on Google +, or on Twitter, @TylerCroweFool.The Motley Fool recommends Chevron and Ultra Petroleum. The Motley Fool owns shares of Ultra Petroleum and has the following options: Long Jan 2014 $30 Calls on Ultra Petroleum, Long Jan 2014 $40 Calls on Ultra Petroleum, and Long Jan 2014 $50 Calls on Ultra Petroleum.
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