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After the spectacular jump in Premcor on the Valero buyout I started looking for additional candidates in the energy sector. The best target I saw this week was Anadarko Petroleum (APC). Anadarko was a strong performer when they released earnings last week with a +25% increase in profits that beat analyst estimates.

The company is based in Houston and it announced last week a new deep water discovery in the Gulf of Mexico. This discovery could add +2% to +3% of reserves to Anadarko's already diverse holdings. According to APC they have proven reserves of 2.37 billion barrels. Anadarko has oil and natural gas operations in the United States, Canada, Tunisia and Algeria, as well as deep sea platforms in the Persian Gulf, the Black Sea, the North Atlantic and the Gulf of Mexico. They have oil assets outside the U.S. and gas assets inside the U.S. which is exactly where they need to be.

They are now the largest independent in a field of giants. Still Exxon could write a check for them should they decide they are ripe for an acquisition.

I am adding them to the watch list on the hopes that another dip in oil will give us a better entry. If we didn't already have some underwater oil positions I would take the entry here at $72.86.
 

Dropped Entries

None


New Watch List Entries
APC
Andarko Petroleum

Current Watch List

FNM - $53.95 Fannie Mae

APC - $72.86 Anadarko Petroleum

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FNM - $53.95 Fannie Mae

** Breakdown Target $51.50 **
** Breakout Target $55.00 **

Fannie Mae has been suffering from numerous ailments including accounting problems and the early April rebound has failed and it appears we are about to start a new leg down. The regulator for FNM has asked for more power to dig deeper.

BUY 2007 $50 LEAP Put VFN-MJ currently $7.00

Buy Insurance Call June $55 FNM-FK currently $1.75

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APC - $72.86 Anadarko Petroleum

** Breakdown Target $70.50 **
** Breakout Target $76.50 **

Anadarko has 2.37 billion barrels of proven reserves. They are the largest independent in a field of giants. Buying reserves is cheaper than finding them.

Breakdown Target
BUY 2007 $75 LEAP Call OCP-AO currently $11.30

Breakout Target
BUY 2007 $80 LEAP Call OCP-AP currently $9.10

Buy Insurance Put June $65 APC-RM currently $2.15
 

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