Anadarko and Devon are viewed as prime targets. Anadarko, which has grown through acquisitions, is considered receptive to a takeover. And Devon, headed by longtime CEO Larry Nichols, 66, finally may be willing to deal. XTO is viewed as an unlikely seller because CEO Bob Simpson, 60, seems intent on creating the largest domestic natural-gas producer.

"This has been one of the sharpest corrections ever in E&P," says David Kistler, an energy analyst at Houston-based Simmons & Co., which focuses on independent North American energy and production stocks. "Nearly every stock screens with tremendous valuation upside." Simmons estimates that major independents like Anadarko Petroleum (APC), Devon Energy (DVN) and XTO Energy (XTO) now trade at little more than half their net asset values. Kistler views the independents' risk/reward ratio as excellent.

Among U.S. independents, XTO has been particularly hard hit on Wall Street, with its stock tumbling to the mid-40s from a June peak of 73, as investors fret over declining gas prices and the company's $10 billion acquisition spree this year. But over the past 22 years under Simpson's leadership, XTO has become a leading U.S. natural-gas producer, with excellent drilling results, low finding costs and shrewd acquisitions. At a recent 45, XTO was valued at 10 times projected 2008 profits and at less than $2.50 per thousand cubic feet of reserves. The company has long traded at a premium to its peers, based on earnings, cash flow and reserves, but that premium has disappeared. Given such valuations, it seems tough to go wrong now with XTO or almost any major energy stock, even if energy prices fall a little further.

It's hard to find a sizable energy company that's trading for more than 10 times next year's estimated earnings. As the table below shows, the major oils -- ExxonMobil (ticker: XOM), Chevron (CVX), BP (BP) and ConocoPhillips (COP) -- now fetch five to seven times next year's projected profits. The majors have rarely had such low price/earnings ratios.

Paul Cheng, Lehman Brothers' energy analyst, is a fan of Chevron because of its low valuation. It recently was trading at 83, just 6.6 times projected 2008 profits of $12.70 a share. Cheng expects the company to be able to boost output by 4% in 2009 and 2010, according to a recent note. Wall Street seems wary of Chevron because much of its production growth is coming from potential trouble spots overseas, including Nigeria, Kazakhstan and Angola. Conoco, whose shares, at 80, trade at a rock-bottom six times projected 2008 earnings, has less international exposure than Chevron and Exxon, but that hasn't helped its valuation

It's hard to find a sizable energy company that's trading for more than 10 times next year's estimated earnings. As the table below shows, the major oils -- ExxonMobil (ticker: XOM), Chevron (CVX), BP (BP) and ConocoPhillips (COP) -- now fetch five to seven times next year's projected profits. The majors have rarely had such low price/earnings ratios.

It's hard to find a sizable energy company that's trading for more than 10 times next year's estimated earnings. As the table below shows, the major oils -- ExxonMobil (ticker: XOM), Chevron (CVX), BP (BP) and ConocoPhillips (COP) -- now fetch five to seven times next year's projected profits. The majors have rarely had such low price/earnings ratios.

Shares of Suncor, the most prominent oil-sands play, have slid to about 50 from 74 in May, hurt by lower crude prices and disappointing production. But Suncor's daily output should rise sharply in the next year, and its shares now are at a reasonable 8.5 times next year's estimated earnings. In recent years, Suncor has consistently traded at a P/E premium to other major oil companies because it has enormous reserves that may last a century, against the 10 to 20 years for the major international oils. This is a huge advantage.