Today I am upping my investments to 7% in the Energy Sector. I have chosen Apache Corp NYSE:APA as a first time purchase to my portfolio for 2 reasons:
1. I believe the price of a barrel of oil has bottomed
2. The US will become energy independent and APA will be a beneficiary.
A new United States Geological Survey (USGS) assessment of the riches of the Permian Basin, released just last month, showed that in just the Wolfcamp shale in the Midland Basin portion of the Permian alone, there are still 20 billion barrels of undiscovered, technically recoverable oil. That’s an assessment that will necessarily trouble OPEC.
Not only is this newest discovery three times bigger in terms of recoverable oil than North Dakota’s Bakken formation, but it’s all also the largest “continuous” oil discovery in the entire U.S. So, the rush to both get a foothold here and to employ new recovery technologies is on, with spending close to $20 billion year-to-date in 2016, according to new analysis from IHS Markit.
For APA, more than 3,000 future drilling locations have been identified in the Woodford and Barnett formations alone. “Our announcement today represents a significant addition to our already deep and highly economic Permian Basin position. With the contribution of Alpine High to our global portfolio of world-class international and North American assets, Apache clearly has more profitable-growth opportunities than at any other time in the company’s 60-year history.” – Source: APA Investor Relations release 988060
Additionally, the current technical condition for APA is strong and the chart pattern suggests that upward momentum should continue. Over the last 50 trading days, when compared to the S&P 500, the stock has performed in line with the market. MACD-LT, an intermediate-term trend indicator, is bullish at this time. Over the last 50 trading sessions, there has been more volume on up days than on down days indicating that APA is under accumulation, which is a bullish condition. The stock is trading above a rising 50-day moving average. This validates the strong technical condition for APA. The stock is above its 200-day moving average which is pointed up indicating that the intermediate term trend is bullish.
Oil will remain the world’s primary energy source, fulfilling 1/3 of all demand.
Oil will continue to play a leading role in the energy mix, driven by demand in transportation and feedstock for the chemical industry. – ExxonMobile 2017 Forecast
Cramer is a buyer of Schlumberger Limited (NYSE: SLB), Magellan Midstream Partners, L.P. (NYSE: MMP) and Apache Corporation (NYSE: APA). He advised a viewer to hold these stocks if they are a part of a big diversified portfolio.
The stable production and free cash flow from Apache’s international and offshore segment were just what the company needed this year to help it manage through lower oil prices. Those factors clearly made that segment the company’s best performer this year after North American onshore suffered from lower margins and production declines. That said, just because North American onshore had a down year, does not mean it has a dim future. Quite the contrary; that segment has the potential to drive the company’s results for years to come due to its enormous untapped resource base.- Matthew DiLallo Motley Fool