What Is The Best Oil Play – APA, XOM, Or BHP?

When investors think of oil companies, Exxon Mobil (XOM) is not far from top of mind.

As the world’s largest non-state sponsored producer of oil and gas, and the United States’ largest company by market cap, it’s a good bet that plenty of investors have put their bets on XOM in order to gain exposure to the boom in oil prices.

But is that faith warranted? Here’s a chart of Exxon, Apache Corp, and BHP Billiton compared against WTI crude prices since early 2000:



Photo: HiddenLevers

It’s pretty obvious from the chart which company tracks oil prices more closely, and which has been the better oil play over the last decade. In statistical terms (based on HiddenLevers’ analysis), oil prices account for over 90% of the variation in Apache’s stock price, 84% of the variation in BHP’s price, and roughly 70% of the variation in Exxon-Mobil’s price.

Now it may not be surprising that a pure-play oil producer like Apache has outperformed Exxon, which produces, refines, and markets oil and gas products. But what about BHP, which is best known as a miner of coal and base metals?


Photo: HiddenLevers

BHP’s macro profile shows that BHP is in fact strongly impacted by oil prices, while coal and steel are not closely linked with BHP’s performance. Dig deeper, and you’ll find that BHP does in fact produce a significant amount of oil and gas.

As an investor, it definitely pays to understand the macro drivers of a stock beyond the headlines. In this case, a mining company turns out to be an oil company, and the biggest oil company in the land turns out to be quite a laggard.

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