On Nov 14, we have issued an updated research report on Anadarko Petroleum Corporation (APC). The company’s premium properties in the Wattenberg, Eagleford and Wolfcamp basins, and steady progress at the Lucius development project in the Gulf of Mexico will likely boost production. However, Anadarko Petroleum’s profitability is exposed to volatile and cyclical oil, natural gas and NGL prices.
Anadarko reported mixed results in the third quarter of 2014. While the company’s earnings missed the Zacks Consensus Estimate, revenues beat the same. On a year-over-year basis, the top and bottom line increased primarily on the heels of higher crude oil & condensates and natural gas liquids sales.
Woodlands, TX-based Anadarko Petroleum strives to expand its worldwide exploration, appraisal and development programs, which require sizeable capital investments. In the third quarter of 2014, the company invested $2.1 billion to strengthen its existing operations. For 2014, the company plans to incur capital investments in the range of $8.6–$8.8 billion, including an allocation of $2.0–$2.2 billion for the fourth quarter.
In addition, Anadarko Petroleum’s premium domestic shale properties are expected to be the primary production drivers. These assets include Colorado’s Wattenberg and the Wolfcamp Shale, the Delaware Basin as well as Eagleford of Texas. Also, the company continues to advance exploration programs at its deepwater operations.
Apart from this, Anadarko Petroleum continues to work towards improving its financial position. The company’s cash and cash equivalents as of Sep 30, 2014 increased substantially to $8.3 billion from $3.7 billion as of Dec 31, 2013, primarily on the heels of asset monetization.
On the downside, we are concerned about Anadarko’s exposure to volatile and cyclical oil, natural gas and NGL prices and the competitive oil & gas industry which could deter the company from achieving its targeted growth.
Anadarko Petroleum currently has a Zacks Rank #3 (Hold).
Stocks That Warrant a Look
Better-ranked stocks in the oil and gas space include Sandridge Mississippian Trust II (SDR), Petrobras Argentina SA (PZE) and YPF S.A. (YPF). While Sandridge and Petrobras currently sport a Zacks Rank #1 (Strong Buy), YPF S.A. carries a Zacks Rank #2 (Buy).
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