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Which is the best energy company for value investors?

There has been no mercy shown to shares in ASX-listed energy producers over the last three months as the price of oil has bombed.

Many companies are down more than 20%, but some still have stellar long-term growth prospects and are starting to look like great value propositions.

To find out just how great, I’ve compared four S&P / ASX 200 Index (Index: ^AXJO) (ASX: XJO) listed oil and gas companies to see how they stack up for value investors.

Price-to-earnings

The price-to-earnings ratio can help to give a sense of the level of growth the market anticipates for the company, but it can fluctuate widely and fails to provide a picture of the company’s assets.

Santos Ltd (ASX: STO) commands a high P/E ratio because of significant expected increase to production over the next three years as new projects come online, while Drillsearch Energy Limited (ASX: DLS) looks comparatively cheap, but is forecasting flat or declining production growth in 2015.

 Company Market Cap 3-month price change FY14 P/E EV/2P ratio P/B
Santos Ltd (ASX: STO) $12.47 Billion -11% 27.4 12.7 1.3
Beach Energy Ltd (ASX: BPT) $1.68 Billion -20% 16.3 14.8 0.89
Senex Energy Ltd (ASX: SXY) $580 Million -28% 15.2 12.6 1.2
Drillsearch Energy Limited (ASX: DLS) $532 Million -21% 6.9 18.8 1.46

Source: Yahoo Finance, company releases

Enterprise Value / 2P reserves (EV/2P)

The EV/2P measure lets us find the company with the cheapest pool of 2P (proven + probable) oil and gas reserves.

Using enterprise value takes into account how much cash and debt a company has in addition to its market capitalisation which helps level the playing field.

By this measure Senex Energy Ltd (ASX: SXY) has the cheapest pool of reserves, closely followed by Santos.

The real sweetener to Senex is the company’s aspirations to increase reserves from 39.9 million barrels of oil equivalent (mmobe) to as much as 150mmobe in 2018. If successful, at its current share price that would put the company at an EV/2P ratio of just 3.36 versus today’s EV of $503 million.

It’s a bold target by Senex, but an exciting one for investors given management’s history of following through on its targets.

Price to book ratio (P/B)

Our final value measure compares a company’s price to its book value. A company scoring less than 1 sells for below the value of its net assets and is worthy of a closer look by value investors.

Senex again stacks up nicely at 1.2, a tick under Santos at 1.3. But it is Beach Energy Ltd (ASX: BPT) which really jumps out in the value stakes at 0.89.

In Beach Energy’s 2014 annual report the company declared net assets of $1.8 billion, yet had a market cap of just $1.68 billion at the time of writing. Given Beach had a higher EV/2P ratio it suggests that the company has a higher mix of cash and infrastructure assets than 2P oil and gas reserves compared to the other three companies.

Best value

From an all-round value perspective, my top value pick is Senex Energy which has very attractive growth prospects and relatively cheap 2P reserves. Buying Beach Energy for less than its net asset value could also be an attractive prospect.

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Motley Fool contributor Regan Pearson owns shares in Senex Energy