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Is it Worth Holding on to Anadarko Petroleum (APC) Stock ?

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We updated our research report on Anadarko Petroleum Corporation on Aug 17. This oil and natural gas exploration & production company reported a loss in the second quarter, wider than the Zacks Consensus Estimate.

Despite the company’s disappointing performance in the second quarter, its premium shale properties, including the Delaware and Denver-Julesburg basins, and the Deepwater Gulf of Mexico are expected to be the primary production drivers in the future.

In addition to domestic assets, Anadarko’s international assets are also yielding positive results. During the second quarter, the company increased sales volume by 25% year over year, driven by oil volumes from the TEN project offshore Ghana. New discovery and existing Columbian assets will boost the performance of the company.

Anadarko Petroleum has been systematically selling its non-core properties since 2004. The company exceeded its monetization target of assets worth $4 billion in 2016. It monetized asset worth nearly $3.5 billion in the first half of 2017. The company will utilize the proceeds to repay debts and strengthen its balance sheet.

Anadarko operates in a highly competitive oil and gas business space.  Some of its peers like major integrated oil companies, state-owned foreign oil companies and independent producers of oil and natural gas have greater and more diverse resources.

Oil and gas companies need to explore and find economic reserves to stay competitive in this space. Increase in dry hole expenses is a cause of concern for the company. Dry hole expenses in the first six months of 2017 were $843 million compared with $6 million in the year-ago period. This will adversely impact the margins of the company.

Anadarko Petroleum currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Performance of the Peers

Among the other companies in the same industry, Devon Energy Corporation (DVN - Free Report) , Noble Energy Inc. and WPX Energy Inc. second-quarter earnings surpassed the Zacks Consensus Estimate.

Price Movement
 
Anadarko Petroleum has lost 23.9% in the last 12 months compared with 31.6% decline of its industry.



The industry Anadarko Petroleum belongs to was adversely impacted by substantial drop in the commodity prices.
 
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