Two of the Best Stocks to Buy as Big Oil Returns to America

Todays top stocks to buy“After years of focusing on overseas expansion, big oil is returning to the US with a bold new outlook. Find out why American oil is roaring back and two of the best stocks to buy now” —

For almost thirty years the American oil industry experienced a mass exodus.

As the lucrative, easy-to-reach oil deposits we had become so accustom to in 60’s and 70’s began to dry up, Big Oil largely abandoned domestic exploration in pursuit of greater returns in other oil-rich regions of the world.

Companies like Apache Corp. and ConocoPhillips ventured off to such far-flung locales as Egypt and Nigeria. And while these moves provided some degree of success… we have seen a dramatic tide reversal over the past three years.

There’s now a renewed interest among oil’s big players to concentrate growth targets right here on home turf.  In fact, the aforementioned companies along with the likes of Hess Corporation and Devon Energy have largely refocused their efforts on American oil.

For some of these majors, the reasons are three-fold.

  1. Business conditions in developing nations can be volatile:While industry regulations and tax rules are difficult issues to navigate in the most stable of countries, the real wildcards in exploring for oil in less developed nations are politics and civil unrest. The past five years have been a great example of this.Uprisings in several prominent oil producing nations have led to broad-based slow down of the entire oil industry. For example, Egypt, Syria, and Libya, all faced sharp setbacks in production. Likewise, Nigeria, Africa’s biggest oil producer, routinely sees kidnappings, pipeline bombings, oil theft and community upheaval while industry legislation often stalls in parliament.Such costly delays and uncertainties have resulted in several majors like Shell and Total divesting a number of their Nigerian assets.
  2. The original global growth strategy isn’t providing adequate returns for shareholders:A number of companies expanded heavily outside of the United States under the notion that global growth would drive strong levels of oil demand.  However, that hasn’t happened.  Companies are now backtracking on their plans.Occidental Petroleum Corp. for example, is considering selling its overseas projects in the Middle East to pare down the company’s size and improve its stock valuation. Similarly, Anadarko Petroleum Corp. sold some of its Brazilian offshore blocks last year to help service their debts.
  3. Technological advancements:Perhaps the most important development driving majors return home is the vast improvement in drilling technology that occurred over the past ten years.It’s long been known that American soil contains some of the most abundant sources of oil and gas in the world.  The challenge however, has been getting it out of the ground economically. Before hydraulic fracturing techniques became the norm, rich shale formations across America were deemed uneconomical. But now that American innovation has unlocked these deposits, big oil has all the incentive it needs to re-focus and grow its domestic assets.

    What’s more, in light of these technological advancements the US Geological Survey recently updated its estimates for technically recoverable reserves in the prolific Bakken and Three Forks formations.

    The USGS now estimates that the formations now hold 7.4 billion barrels of recoverable crude.  That’s more than double what was predicted just five years ago — giving oil companies even MORE ammunition to ramp up their domestic operations.

    With other notable regions like the Permian and Anadarko Basins also luring the big players back, don’t be surprised if we see more jaw-dropping resource estimate increases in the near future.

Which brings us to our best stocks to buy now.

Best Stocks to Buy Now:

As we mentioned earlier, stocks like Anadarko Petroleum (APC:NYSE) and Occidental Petroleum (OXY:NYSE) have recently made moves to refocus more of their operations on American oil.

In fact, 62% of Occidental’s production now comes from domestic sources.  Furthermore, its average operating cost per domestic barrel fall from $17.43 in 2012 to $14.06 in Q1 13.

Cost improvements like these go straight to the bottom line and are fundamental to Occidental’s goal of increasing its dividends yearly (currently the stock pays out $2.56 per share for a 2.80% yield).

Anadarko on the other hand, plans to spend over 60% of its multi-billion dollar budget on developing domestic oil fields.  It claims to have more than 5 billion barrels here at home and hopes to increase production 10% over the next year.

As American oil continues to gain strength, both of these stocks are worth considering for your portfolio.

Yours in profits,
Todays top stocks to buy
John Holt
for Top Stock Millionaire
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