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We maintain our Neutral recommendation on Anadarko Petroleum Corporation (APC - Analyst Report). The oil and gas exploration and production company currently carries a Zacks Rank #3 (Hold). The current Zacks Consensus Estimate for first-quarter 2013 is set at 88 cents per share.

Why the Reiteration?

Anadarko posted mixed results for the fourth quarter 2012, as the bottom line beat the Zacks Consensus Estimate while the top line fell short. Higher sales volumes partially tempered by lower realized product prices were responsible for the outcome.

We believe Anadarko will continue to benefit from its increasing presence in the reserve rich prospects of Africa. The company’s light oil Paon discovery in offshore Cote d'Ivoire will be another profitable addition to its asset basket. In the U.S., the company is well positioned to exploit its Louisiana and Gulf of Mexico assets.

Anadarko’s targeted reserve accumulation of 3 billion barrels by the end of 2013 and its effort to increase its presence in resource-rich prospects of Ghana and Algeria will bode well for its future growth. Moreover, a strong operating cash flow position will allow the company to attract lucrative investment options.

However, a further decline in the credit rating from the current “BBB-“ as per Fitch's could create difficulty for the company to raise debt while risks related to deepwater operations are also a matter of concern.

Other Stocks to Consider

Other stocks in the exploration and production domain that are presently doing well include Range Resources Corporation (RRC - Analyst Report), EPL Oil & Gas Inc. (EPL - Snapshot Report) and Denbury Resources Inc. (DNR - Analyst Report). While Range Resources and EPL Oil & Gas carry a Zacks Rank #1 (Strong Buy) Denbury holds a Zacks Rank #2 (Buy).

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