With domestic natural gas resources potentially meeting America's energy demand for the next hundred years, drilling companies have a long way to run if the thesis proves true. One company that looks especially well-positioned to exploit this demand is Apache (NYSE: APA).

Great management has the uncanny ability of sniffing out such opportunities before others can blink. I believe Apache has that.

Cash matters
Performance has been impressive lately. With acquisitions of more than $11 billion in 2010, Apache now has a well-balanced portfolio of core assets to play with. Acquisitions worth more than $1 billion from Devon Energy (NYSE: DVN), and worth more than $6 billion from BP (NYSE: BP), spanning across locations, underline where the company's headed.

But what really catches my attention is this: Even after these billion-dollar acquisitions, the company's free cash flow currently sits at an eye-popping $3 billion. That's impressive!

A look into its recent relative performance should help investors get a clearer picture of what is happening.

Returns matter, too
With a compounded annual growth rate of EBITDA at 10.5% for the last five years, Apache has evidently shown promise when compared with the likes of Anadarko Petroleum (NYSE: APC) at 2.6%, Chesapeake Energy (NYSE: CHK) at a dismal -4.2%, and Marathon Oil (NYSE: MRO) at 5.3%.

A return on equity of 16.5%, which is higher than most of its peers, also shows how well the company is running itself from an efficiency standpoint. With total debt to equity standing at 32.4%, investors should feel comfortable with the company's balance sheet, too.

How cheap does Apache look?
So far as pricing of the stock is concerned, Apache does look attractive. Price to earnings stands at 15.50. For Marathon, it stands at 14.77, Anadarko at 53.89, and Chesapeake at 13.34. However, Apache has the advantage of a positive free cash flow, which Chesapeake doesn't. In fact, this shows that the market has factored in the advantages for good reason.

Price to book stands at 2.16, which is slightly higher than that of Chesapeake at 1.74, Anadarko at 1.96, and Marathon at 1.59. While assets look relatively expensive, Apache's huge reserves -- with natural gas consisting of 56% of estimated proved reserves -- makes me believe that the assets are still undervalued in the face of growing natural gas demand.

Foolish bottom line
With 19% of last year's worldwide equivalent production from international gas reserves, Apache is in a position to take advantage of increasing prices in Australia and Argentina. I believe this stock is still undervalued, given the huge potential this company shows. Foolish investors should definitely pay attention to what is going to happen in the natural gas sector.