Diversification used to be considered a selling point. There was a time when it was not unusual for a medium or large E&P to have a base of diverse North American operations, with maybe one or two plays overseas that were higher risk, but higher reward if successful.

For Europeans, who must choose from a narrower menu of domestic energy assets, there was a tendency toward international operations, often carrying a larger exploration component.With exploration, of course, the outcome can be binary.Dry holes are a fact of life, and an operator with a good track record was expected to come out ahead if it had sufficient staying power.

But the success of resource plays in North America is making these ideas appear outmoded, as money flows continue to move stateside. Several brokerage firms have cited growing interest among overseas investors in resource plays, forsaking international E&Ps whose historical premiums for their exploration upside are now more questionable.And, in the US, some E&Ps are increasing their focus on domestic resource plays, which have less political risk, using funds available as overseas assets are divested.

E&Ps electing to rein in overseas commitments include Apache Corp., which underwent a “strategic shift” that led it to focus on areas “with more predictable production growth.” After its stock lagged for much of this year—even after announcing the sale of its Gulf of Mexico shelf assets—the company had a one-day jump of 9% on news it had sold a 33% interest in its Egyptian upstream operations.

In addition to gaining a much-needed “marker” for its out-of-favor Egyptian asset, Apache's move to rebalance its portfolio was designed to “better deliver the full potential of our deep North American onshore resource inventory,” including its Central and Permian divisions, Apache said at the time. Proceeds are earmarked for debt reduction and a 30-million-share buyback.

Also lightening up on overseas assets is Occidental Petroleum Corp., which plans to sell a minority interest in its Middle East North Africa operations, as well as divest certain Midcontinent assets.With multibillion-dollar proceeds, Occidental plans a major share buyback.Its operations in the Permian will benefit from a $500-million increase in capex in 2014, allowing it to drill roughly 150 horizontal wells, up fivefold from the current-year level.

But if the market is rewarding moves to bring more focus to assets, that trend is also extending to resource plays, with single-basin stocks generally trading at more generous valuations.This applies especially in the Permian.

Pioneer Natural Resources perhaps best illustrates the trend (even though some 20% of its production comes from the Eagle Ford).The company has led the charge in de-risking what eventually could be as many as six intervals encompassing some 3,500 feet of potential stacked pay in the Permian. Major successes include horizontal wells targeting the Wolfcamp A, B and D.

In comparing E&P valuations, net asset value (NAV) is frequently a preferred metric, although simple multiples of EV/EBITDA (enterprise value to earnings before interest, depreciation and amortization) can also be illustrative.In late October, Pioneer was trading at an EV/EBITDA multiple, based on 2014 EBITDA estimates, of about 12x.Other Permian players included Laredo Petroleum, trading at around 11x, Diamondback Energy, at just over 8.5x, and Concho Resources, at close to 8x.In the Marcellus, “pure-play” Cabot Oil & Gas Corp. traded at 8.7x, according to CapitalOne Securities.

Evan Calio, managing director with Morgan Stanley, prefers to lay his bets on the multibasin, large-cap players.They have ring-fenced massive acreage to support their growth, and they tend to be more reliable in meeting earnings expectations. Finally, they have room to re-rate to higher multiples. Anadarko Petroleum, EOG Resources and Noble Energy in late October traded at 5.4x, 6.2x and 6x 2014 EBITDA estimates, respectively, several turns cheaper than their single-basin peers.

In addition, with the market offering little credit for exploration, the large-cap names offer a lower-multiple vehicle to play quality resource plays—whether it's a mix of Bakken, Eagle Ford, Marcellus, Niobrara or Permian—with exploration thrown in at a discount.And who wouldn't acknowledge the deepwater and/or international achievements of Anadarko or Noble Energy?Or the new ventures success of EOG?

As they say, you pays your money, and you takes your choice.

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