A Slick Play In Energy

With oil prices slumping, not many investors dare bet heavily on the poor-performing energy stocks. But despite the gloom, some money runners have been snapping up shares of Anadarko Petroleum, one of the nation's major independent oil and gas producers. What's to gush about Anadarko?

Trading at 41--down from 58 in early October--Anadarko "is very cheap based on its exploration work in the Gulf [of Mexico] and elsewhere," says a New York fund manager. The company, he adds, is in the midst of a "very aggressive and successful exploration program in the gulf, onshore Texas, and Algeria." Anadarko recently announced a major discovery with Phillips Petroleum in the gulf. He figures that the find contains 150 million to 300 million barrels of oil, worth $5 to $7 per Anadarko share. Phillips and Anadarko have eight other areas with similar potential where they will drill in the next two years, says this fund manager.

Even more exciting, he asserts, is a well in the gulf called East Cameron Parish, which is controlled by Anadarko. Results of that well should be announced in the next three weeks. "All indications point to a large oil and gas find," he insists. If so, the well could produce $750 million to $1.5 billion worth of oil, or $15 to $25 a share, he says. The fund manager expects Anadarko to announce results from two of its wells in Algeria by February. He sees Anadarko's stock doubling in the next 12 months.

Ron Barone, an analyst at Kidder Peabody, is also high on Anadarko. "It has several potential highly prolific drilling prospects," says Barone, that could bolster its reserves, net asset value--and hence stock price--in 12 to 15 months.

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