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Apache Earnings Report Is Slightly Light, but the Company's a Heavyweight

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If you think about it, the Houston area is home to a pair of independent oil and gas producers that are amazingly similar to one another in a variety of superficial and substantive ways. Both of their names begin with the same letter, their tickers are one letter apart, they're close to the same size, they're both active in the U.S. and overseas, and both are analysts' favorites.

I'm speaking of Apache Corp. (NYSE: APA  ) and Anadarko Petroleum (NYSE: APC  ) . Apache resides in Houston proper, in an area that through the years has been home to a number of producers and oil-field services companies, including Weatherford International (NYSE: WFT  ) , before it headed for European environs. Anadarko sits in The Woodlands, a planned community 30 miles to the north, where ExxonMobil (NYSE: XOM  ) is constructing a campus that will ultimately house most of its thousands of Houston-based employees.

Anadarko's loud beat
But the more important aspects of the two "A" companies involve where they operate, the quality of the third-quarter results that they both released, and what the future appears to hold for each. Anadarko's revenues of $3.33 billion fell somewhat short of the analysts' consensus expectation of $3.40 billion. However, after items, its per-share earnings of $0.84 handily topped the estimated average of $0.76. Further, as an erstwhile analyst, I find it noteworthy that, of the 33 Wall Streeters who follow the company, 16 rate it a "Strong Buy," while another 11 have it classified as a "Buy."

In the U.S., Anadarko operates in the Rocky Mountains region, the southern part of the country, the Appalachian Basin, Alaska, and in the deepwater Gulf of Mexico. During the past quarter, the company upped its activity ante in the fertile Eagle Ford play in South Texas and the Wattenberg HZ in Colorado. Internationally, the company is active in Algeria and Ghana, and it has current representation in West Africa, Mozambique, Kenya, South Africa, New Zealand, and China.

The Kenya surge
Indeed, on Monday, management announced that it would drill back-to-back wells offshore Kenya, each costing about $140 million. The planned units, which will be kicked off next month, will add to a recent increase in oil and gas drilling in the country.

While most of the integrated producers are struggling to maintain their oil-equivalent production levels, Anadarko's third-quarter production increased by 79,000 barrels of oil equivalent per day, a 12% improvement from the comparable quarter of 2011. In addition, management announced an increase in full-year-production guidance of 3 million barrels, without a commensurate hike in anticipated capital spending.

As you may know, Anadarko held a 25% stake in BP's (NYSE: BP  ) tragic Macondo well, which blew out in the Gulf of Mexico in 2010. As a result, the company remains a defendant in a $25 billion lawsuit, brought in part by the U.S. government.

Analysts target Apache
Apache, which, like Anadarko, boasts a market capitalization in excess of $30 billion, reported revenue of $4.18 billion, somewhat higher than the $4.10 billion that had been estimated for the company. However, its $2.16 in adjusted per-share earnings undershot the consensus expectation of $2.27 per share. As is the case with Anadarko, Apache remains in good standing with its analysts. Of the 31 ratings on the company from Wall Street, 13 are "Strong Buys," another 12 are "Buys," and the remaining six analysts have Apache rated a "Hold."

In addition to the Permian Basin, Western Canada, and the U.S. midcontinent, Apache operates internationally in Australia, Argentina, Egypt, and Canada. In a recent U.S. Central Gulf of Mexico offshore lease sale, the company was high bidder among 56 participating companies for 61 shelf and 29 deepwater properties.

During the past quarter, Apache's 771,000 average barrels of oil equivalent per day (boepd) represented a 2.4% year-on-year increase. However, but for production downtime, daily output would have been increased by about another 25,000 daily equivalent barrels. Production from the Permian Basin and the U.S. Central region totaled 183,961 boepd, up 30% from just over 141,000 boepd in the second quarter a year ago. At present, the company has a total of 56 rigs actively drilling on liquids-rich targets in the Permian and Anadarko basins.

The Foolish bottom line
So it appears that both companies are active, expanding, and highly rated. Beyond that, Anadarko topped expectations in its latest quarter, while Apache fell a bit short. Nevertheless, from a purely metrics perspective, Apache boasts a 6.44% return on assets, to Anadarko's 1.41%, Apache's debt-to-equity ratio is 37.9, to Anadarko's 66.0. And while neither company will cover you up with dividends, Apache's forward annual yield is 80%, compared to 50% for Anadarko.

All in all, Apache is my favorite by about a hair. However, my advice to Fools with a yen for independent producers with balanced domestic and international assets -- an area of the energy sector that I currently consider to be especially attractive -- is to add both companies to your individual versions of My Watchlist.

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