| Company | % Liquids in Portfolio | Oil Production Replacement Rate (3 Years) | Reserve Replacement Costs (3-Year Average) Per boe |
|---|---|---|---|
| Rosetta Resources (NASDAQ:ROSE) | 57% | 846% | $6.99 |
| Continental Resources (NYSE:CLR) | 72% | 827% | $12.61 |
| Laredo Petroleum (NYSE:LPI) | 52% | 1,042% | $13.51 |
| SM Energy (NYSE:SM) | 53% | 392% | $14.67 |
| SandRidge Energy Inc. (NYSE:SD) | 58% | 704% | $14.85 |
Sources: Ernst & Young and S&P Capital IQ; author’s calculations.
On the surface, there isn’t much that these companies have in common. None of them operates in the same part of the country. Over these past few years, SandRidge Energy Inc. (NYSE:SD), Continental Resources, Inc. (NYSE:CLR), and SM Energy Co. (NYSE:SM) have been relatively active in terms of buying and selling assets, but Laredo Petroleum Holdings Inc (NYSE:LPI) and Rosetta Resources Inc. (NASDAQ:ROSE) have remained pretty quiet on this front up until the past couple of months.
So what ties these companies all together? They’re all very close to being one-trick ponies as energy plays.
| Company | Primary Location of Assets | % of Production |
|---|---|---|
| Rosetta Resources | Eagle Ford | >90% |
| Continental Resources | Bakken | 88% |
| Laredo Petroleum | Permian Basin | 72% |
| SM Energy | Eagle Ford | 60% |
| SandRidge Energy | Mississippian Lime | >50% |
Source: Investor Presentations.
In the case of SandRidge Energy Inc. (NYSE:SD), it’s a bit of a long shot to call it a pure Mississippian Lime play when just 50% production comes from there. Based on its capital expenditure plan, though, it’s pretty clear that it plans to move in that direction. The company plans to spend just over $1 billion in the Mississippian Lime in 2013, versus only $160 million on its other assets in the Gulf of Mexico.
By focusing efforts in a single play, these companies are able to leverage their operational expertise in these regions to restock their reserves at a price much less than others that have assets spread out over multiple plays. For investors looking at energy investments, these five companies could prove to be much more successful than their competitors down the road if they can maintain these low reserve replacement costs.
What a Fool believes
Nobody makes an investment decision on a single metric, nor should you. You certainly wouldn’t purchase a house based on the quality of the bathroom alone, and the same should hold true when investing in companies. Think of a metric as one color of paint on your investor palette: It will take a multitude of these metrics blended together to paint your investment masterpiece.
Investors were startled after SandRidge plummeted when natural gas prices reached 10-year lows, but with the company focusing on growing liquids production, the future looks optimistic.
The article 5 Oil Companies Building Assets the Best originally appeared on Fool.com.
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 has no position in any of the stocks mentioned.
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