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Apache Is Ready for a Gusher

By Mara Der Hovanesian

Energy stocks: Been there, done that? Not so fast. "Most people believe it's over and done with," says Susan Byrne, money manager for Westwood Management, which oversees $4 billion. "But we're expecting a much longer period of growth and profitability." Why? Because demand will spike and supply won't cover the needs.

That's where astute energy producers such as Apache (APA) come in, says Byrne. Westwood holds the stock in most accounts, including the $250 million Gabelli Westwood Equity Fund. For years, the Houston outfit has been building up its natural-gas and coal reserves, funding acquisitions with equity offerings. Analysts say it got the reserves for a song, compared with the cost of building them from scratch. The result: "very strong positive earnings surprises," says Byrne. First Call's consensus estimate for first-quarter 2001 earnings (to be released Apr. 26) is $2.12 per share and $7.20 for the year 2001. Byrne's own forecast is $2.50 for the quarter and $8.25 for the year.

The stock, trading at 62, sells at a price-earnings ratio of only 7.5, based on Byrne's estimate for this year's earnings: her near-term target is 80. Christopher Wolfe, equity strategist at J.P. Morgan Chase, has a 12-month target of 90. Gene Marcial is on vacation.

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