Thanks to red-hot oil prices over the past year, oil stocks are up sharply. To give some sense of the magnitude of the rebound, the iShares U.S. Oil & Gas Exploration & Production ETF (NYSEMKT:IEO) -- which holds more than 60 U.S.-focused oil and gas stocks -- has rallied nearly 33% over the last 12 months. However, while that rising tide has lifted most boats, not all oil and gas stocks have enjoyed the oil market's rebound. In fact, some stocks have managed to lose ground in the past year. Two of those laggards are Antero Resources (NYSE:AR) and Apache Corporation (NYSE:APA), which have declined 6% and 12%, respectively, in the last year.

However, that disappointing underperformance could be about to reverse course because both companies are working on plans to unlock shareholder value. As those plans unfold, they could catapult both stocks, making them ones investors will want to watch closely.

Oil pumps with the sun shining in the background.

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Undervalued and looking to do something about it

Antero's decline over the past year comes even though its business has reached a crucial inflection point. After burning through cash to grow in previous years, the company is joining an elite group of E&P companies that are increasing production at a double-digit rate, while generating free cash flow. Because only a half-dozen E&P companies are in that elite class, they fetch a premium valuation compared to other oil and gas stocks. On average, they sell for 9.5 times their enterprise value to earnings before interest, taxes, depreciation, amortization, and exploration expenses, or EV/EBITDAX. For comparison's sake, the average E&P in America sells for 6.4 times EV/EBITDAX. Antero Resources, on the other hand, trades at just 5.1 times that metric, which makes it undervalued versus not only its elite peers, but the average E&P in the U.S.

It's a problem the company is looking to address by considering ways to unlock value. These options include returning capital to shareholders through a dividend or buyback as well as exploring transactions involving its two midstream companies, Antero Midstream Partners (NYSE:AM) and Antero Midstream GP. While the company is starting to generate some free cash flow that it could funnel toward shareholders, it could also consider monetizing its 53% stake in Antero Midstream Partners, which is worth about $2.7 billion. Selling that business would give it the money to quickly buy back a meaningful portion of its dirt-cheap shares, which is the path one peer recently took to unlock value for its investors. While it's unclear what direction Antero will go, there is the potential for the company to move the needle for investors.

A drilling rig with a sunset in the background.

Image source: Getty Images.

Looking for the right key to unlocking this hidden treasure

Apache's slump over the last 12 months is mainly because the company tapped the brakes on the development of its recently discovered Alpine High play so it could build out the necessary midstream infrastructure to maximize the value of future production. The company has already invested $815 million in constructing several processing plants and gathering pipelines to support future production. In addition to that, the company has secured options to buy stakes in several long-haul pipelines to move its output out of the region. In doing so, Apache has quietly created hidden value, which the company is now looking to monetize by securing a midstream partner.

Apache is working toward the completion of an Alpine High midstream transaction this year, which could come in many forms. However, the primary goal will be to pull in some cash proceeds from its investment. Apache sees two potential uses of that money according to comments by CEO John Christmann on the company's first-quarter conference call: Increase its drilling program, or return more cash to shareholders through a buyback program or higher dividend. While both options could create value for investors in the long term, given the near-term infrastructure constraints in the Permian, a share buyback program seems like the better option, especially considering how cheap shares are these days. While it's unclear yet how much it will receive for the midstream business -- and therefore measure the potential scale of a buyback program -- even a small buyback could do wonders for the stock price.

Keep your eyes peeled

At some point this year, Apache and Antero should announce moves intended to boost their sagging stocks. These announcements could be minor such as Antero initiating a divided and Apache raising its payout. Or, they could be major transactions and include a multibillion-dollar buyback authorization that would move the needle for investors. Because the size of their catalysts remains unknown, these stocks will be interesting ones to watch over the next few months.

Matthew DiLallo has the following options: short June 2018 $25 puts on Antero Midstream Partners. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.