Photo credit: Chesapeake Energy
America's energy boom fueled oil-production numbers we haven't seen since the 1990s. It also fueled the stock prices of energy companies that were best positioned to profit from the boom. Some companies, however, had to work in order to get ready for the boom, and here are three that did a great job in 2013 to do just that.
Smart deal making
Devon Energy (DVN -1.06%) has made great strides over the past few years to refocus its business. It has gone from being a natural-gas producer with some international operations sprinkled around the world to a focused North American onshore-liquids producer. Not only that, but it made two really smart deals that has the new Devon poised for a great future.
The new Devon now features an oil-rich position in the Eagle Ford Shale, Permian Basin, and the Canadian oil sands, as well as an impressive midstream operation. The company is positioned to deliver 20% oil-production growth over the next few years while living within its cash flow. Bottom line, in 2013 Devon Energy improved from a good company to a great company. It's a move that few investors noticed as the stock underperformed the market. That sets up investors for a very promising 2014.
Addition by subtraction
SandRidge Energy's (NYSE: SD) most important move of the year saw it fire founder and CEO Tom Ward. The embattled former CEO came under fire from activist investors after he received lavish pay while investors suffered from terrible returns.
New CEO James Bennett is taking over a company with vast resource potential but tight financial resources. As a former CFO, Bennett has tightened the company's purse strings and is focusing on returns over growth at all costs. In doing so he has the company doing more with less. For example, as of the end of last quarter the company drilled 69 more wells than the same period in 2012, but accomplished that feat with $27 million less in capital spend. He has the new and improved SandRidge better positioned to deliver in the years ahead.
The "ah ha" moment
Chesapeake Energy (CHKA.Q) is the company that was an early leader of America's energy boom. But its stock has performed rather poorly as it spent recklessly to build an empire. That cost founder and CEO Aubrey McClendon his job earlier this year as things were so bad at Chesapeake that he was named the Motley Fool's fourth-worst CEO of the year.
New CEO Doug Lawler is focusing on cutting costs to improve returns. He is also doing away with the former plan to sell assets in order to pay for the company's drilling program. Instead, the company will now live within its cash flow and Chesapeake's focus will be on its highest returning projects instead of growth for the sake of growth. That has the company well positioned to drive returns in 2014.
Investor takeaway
All three companies are ending 2013 in a better place than each started the year. While Devon's change has it going from good to great, Chesapeake and SandRidge still have a lot to prove in 2014. That said, the moves made in 2013 have all three companies poised to deliver strong returns for investors in the year ahead.
Three more great energy stocks
