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Marathon Oil Corporation (MRO), Anadarko Petroleum Corporation (APC), Southwestern Energy Company (SWN): Energy Companies – Top 3 Volume Gainers

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Compared with the year-ago period, first-quarter operating and financial results for the energy companies I usually follow were mixed, with higher earnings for the refiners but mixed results for integrated and exploration and production (E&P) companies. Despite mixed financial results, almost all E&P companies increased production.

Within this group, there are three that did this the most: Marathon Oil Corporation (NYSE:MRO), Anadarko Petroleum Corporation (NYSE:APC) and Southwestern Energy Company (NYSE:SWN). Let’s see if you should add these companies to your watch list.

Marathon Oil Corporation (NYSE:MRO)

Favorite pick among volume gainers

Marathon Oil Corporation (NYSE:MRO)’s production gains are sustainable. The company achieved its 22% output gain through ramping up production in the Eagle Ford and the Bakken Shale areas. Besides this, the company is reducing costs and improving operating efficiency. I expect all this (better costs and increased production) to boost Marathon Oil Corporation (NYSE:MRO)’s earnings and cash flow outlook. As a matter of fact, Marathon Oil Corporation (NYSE:MRO) is expected to generate free cash flow of more than $700 million this year and $900 million in 2014 (a 28% year-over-year increase).

With two-thirds of its production being oil and liquids (compared with 47% for its peers), Marathon Oil Corporation (NYSE:MRO) should be on your watch list. The company trades at 2013 10x P/E and 4x price-to-cash flow. Besides, I would expect Marathon Oil Corporation (NYSE:MRO) to lift its cash dividend up from the low 2% yield the company is currently paying.

An exploratory champion with a high price tag

Anadarko Petroleum Corporation (NYSE:APC) has one of the most successful offshore exploratory programs in the industry. Besides, the company has some of the most prized US onshore unconventional assets. The company increased volumes by 13% year-over-year and I think it is close to settling Tronox Ltd (NYSE:TROX) litigation in a favorable way.

Tronox Ltd (NYSE:TROX) argued that Anadarko Petroleum Corporation (NYSE:APC) left the company insufficiently capitalized after acquiring its parent, Kerr-McGee. Ultimately, Tronox is blaming Anadarko Petroleum Corporation (NYSE:APC) for the financial troubles and bankruptcy that followed Anadarko Petroleum Corporation (NYSE:APC)’s acquisition. I do not think the courts shall agree on that.

Besides, a bad outcome in the Tronox case shouldn’t take more than 3% off the company’s value, a figure which is very far from the $14 billion that Tronox was Initially claiming.

Hence, Mozambique gas development and continued exploration successes are more relevant to Anadarko Petroleum Corporation (NYSE:APC)’s valuation than any result at the courts.

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