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Despite the fact that MoneyShow's Jim Jubak, also of Jubak's Picks, is not buying much at the moment, he does have one company in the energy sector near the top of his list of potential new buys.

I'm not buying much of anything right now—the current market action makes me think we'll see profit taking for August, and September looks potentially volatile on worries about a taper at the Federal Reserve's September meeting and threats of a government shutdown at the end of the month. But if I were, shares of Anadarko Petroleum (APC) would be near the top of the list for any new money buys in the energy sector. That's especially true after Anadarko's post New York close announcement Tuesday, that the company would increase its quarterly dividend to 18 cents a share from 9 cents. That's not the kind of yield that makes anyone rich—it's less than 1%—but it is an important vote of confidence by the company's board, in the company's ability to turn its huge portfolio of discoveries into cash flow. That vote of confidence is particularly important to me, because Anadarko has a big position in the Marcellus shale, and I'm starting to hear worries that production from the Marcellus will knock natural gas prices down to the floor (or even the sub-basement) again. Anadarko doesn't seem to share that worry. (The dividend increase is also a statement that Anadarko feels it can handle any negative result from the Tronox lawsuit without serious disruption to its cash flow.)

Anadarko has 24 projects in its current development pipeline. Some of the big ones are in the deepwater Gulf of Mexico where Anadarko keeps hitting major oil on its lease properties. Production from the Caesar/Tonga project in the Gulf of Mexico came online earlier in 2013 and Anadarko's Lucius project in the deepwater Gulf of Mexico remains on schedule for first oil in the second half of 2014. In addition, Anadarko recently discovered oil at Raptor—in 8,200 feet of water—and on the Walker Ridge—in 5,800 feet of water. These discoveries are near Anadarko's Shenandoah and Coronado discoveries in the Gulf.

The company's other mega-projects in Algeria, Ghana, and Mozambique showed continued progress in the just reported second quarter. The Jubilee field, off Ghana, one of the largest discoveries in the world when it was found in 2007, has produced its first oil. In Algeria, a second oil train is on schedule to increase production to 30,000 barrels a day, from the company's El Merk project, by the end of 2013. In the waters off Mozambique, Anadarko discovered natural gas in 1,536 feet of water at Espadarte. That discovery adds to natural gas reserves, off Mozambique, that the company sees as the foundation for a terminal to export liquefied natural gas from Mozambique later in the decade.

Back on land in the United States, the company reported strong drilling results from its shale oil and gas positions in the Delaware Wolfcamp, Wattenberg, Eagle Ford, East Texas, and Marcellus geologies.

A recent report from the US Energy Information Administration doubled estimates for natural gas in the Marcellus formation, that stretches from Kentucky to New York, to 31.9 trillion cubic feet of natural gas. And early results show that wells in the region are relatively cheap to drill and produce very strong flows. That's not exactly bad news—except that the region is currently very under-served by pipelines, making it hard to get gas to market, and sending prices for gas from Marcellus down to $1 per million BTUs (British Thermal Units) at some local hubs. That gas will eventually find its way to the main natural gas market at the Henry Hub in Louisiana, and the worry is that this new supply will send prices, that have only gradually clawed their way above $3 per million BTUs, back toward $2. I wouldn't discount that worry, but Anadarko's dividend hike tells me that this company, at least, thinks it has enough other production projects in the works to make Marcellus worries relatively minor.

Before you buy Anadarko, of course, you should be familiar with the Tronox lawsuit. Tronox, a former subsidiary of Kerr-McGee, which is itself now a subsidiary of Anadarko, has filed suit claiming that it was insolvent and undercapitalized when it was spun-off from Kerr-McGee in 2005. Tronox subsequently filed for Chapter 11 bankruptcy in 2009, under the weight of environmental penalties brought by the Environmental Protection Agency. Tronox has claimed that Kerr-McGee didn't set aside enough money for Tronox to pay its environmental obligations in the spin-off. The suit, seeking up to $25 billion in damages and fees, went to final argument in December 2012, and could be decided in the relatively near term in the Southern District of New York. According to calculations by Credit Suisse, Anadarko's current stock price includes about $3.3 billion for the cost of the suit. That's more than double Anadarko's projection of liability of up to $1.4 billion. A survey by Credit Suisse suggests that the suit has kept a sizeable number of investors, who would otherwise own Anadarko, on the sidelines. A settlement is possible as early as August.

Assuming that it isn't an unexpectedly large disaster for Anadarko, a settlement in the Tronox suit should push the stock higher as money comes off the sidelines.

Full disclosure: I don't own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund, I liquidated all my individual stock holdings and put the money into the fund. The fund may or may not now own positions in any stock mentioned in this post. The fund did own shares of Anadarko Petroleum as of the end of June. For a full list of the stocks in the fund as of the end of June see the fund's portfolio here.

Tickers Mentioned: Tickers: APC

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