We maintain our Neutral outlook on Anadarko Petroleum Corporation (APC) as the stock’s upside potential is presently limited by the slowed drilling permits in the Gulf of Mexico and the uncertainty over Anadarko's liability in the clean-up of the Macondo oil spill.
The positives favoring Anadarko are its deep and diversified asset portfolio, predictable production profile, global business development approach and brilliant execution capability. Along with that, a strong balance sheet, investment-grade rating and access to liquidity enable Anadarko to pursue new strategic and tactical growth opportunities.
However, risks associated with its domestic and international offshore exposure relating to oil spills, natural calamity, equipment failures and compliance of laws and regulation of different countries could impact the operations of the company. Anadarko's profitability also depends on the prices of oil, natural gas and NGLs, which are volatile. A substantial decline or an extended decline in prices could negatively impact the profitability of the company.
Moreover, the possibility of a downgrade from the rating agencies can increase the cost required to access capital and failure to find new reserves or find them on an economical basis to replenish older reserves might have a negative impact on the company. Hence, we continue to maintain a cautious stance on the company.
The first quarter 2011 results of 72 cents per share exceeded the Zacks Consensus Estimate but fell short of the year-ago figure. The Zacks Consensus Estimates for second-quarter 2011, fiscal year 2011 and fiscal year 2012 are, respectively, 87 cents per share, $3.31 per share and $4.29 per share.
Anadarko currently retains a Zacks #3 Rank (short term Hold). The company primarily competes with ConocoPhillips (COP) and Exxon Mobil Corp. (XOM), both presently having a Zack # 3 Rank (short-term Hold)
Based in The Woodlands, Texas, Anadarko Petroleum is primarily engaged in the exploration, development, production, gathering, processing and marketing of natural gas, crude oil, condensate and NGLs.
ANADARKO PETROL (APC): Free Stock Analysis Report
CONOCOPHILLIPS (COP): Free Stock Analysis Report
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