Monday, the energy giant said it struck oil in Australia's Canning Basin.
Read More: Warren Buffett's Top 10 Dividend Stocks
Apache believes one of its wells, the Phoenix South-1, discovered oil in four locations and may hold as much as 300 million barrels. As management put it, "Phoenix South may represent a new oil province for Australia.”
If this is true, it erases prior concerns about whether Apache, which competes with larger rivals Exxon Mobil (XOM) and Anadarko (APC) , can regain its reputation as a strong exploration and production play for oil and gas. Investors shouldn't waste time to find out, however. Now's the time to buy.
The stock, at $98, is up 14% for the year to date but still down more than 6% from its 52-week high, so they are cheap. This is even with Apache posting gains for close to 15% on the year to date, besting the energy sector's 11% gain.
With the stock trading at a P/E of 22, which is two points higher than the industry average, there was concern Apache's shares had outrun its production capabilities. Not to mention, the share traded at a much higher multiple than both BP (BP) and Exxon, even though both BP and Exxon are growing revenue at a faster rate.
Today's development, however, changes the story.
Consider, Australian oil production is projected to rise by an 385,000 barrels per day. This is expected to last throughout the next nine months, according to the country's Bureau of Resources and Energy Economics. For some context, during that same span the same report suggests that total global output may be 95.1 million barrels per day.
In the most recent quarter Apache produced roughly 636,000 barrels per day. Combine this with potentially 385,000 barrels per day from its Phoenix South-1 well and investors are looking at more than one million barrels per day in production. That's more 1% of the projected global oil output over the next year.
Read More: 7 Stocks Jim Cramer Sees Ripe for Takeover
Analyst will have to revise their models on the basis of the company's new discovery. What's more, after recent asset sales, including selling its Egypt business to Sinopec for $3.1 billion, Apache's business has become less risky. The company infused itself with cash while (at the same time) reduced exposure in an unstable Egyptian environment.