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Bull of the Day: Anadarko Petroleum

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Though oil prices have pulled back a bit from their recent highs, U.S. producers are still performing extremely well, having streamlined operations and reduced expenses during periods of lower price levels over the past 3-4 years.  U.S production is on pace to hit 11 million barrels a day this year, more than double the amount produced just 10 years ago.

In fact, so much oil is now being produced in the central and southwest U.S. that many producers report that their biggest bottleneck is transportation – simply moving physical product to the coast where it can be shipped to global markets.

Anadarko Petroleum (APC - Free Report) has been extremely savvy in securing rail and pipeline contracts to insure that its petroleum products (natural gas as well as crude oil) get to market efficiently. In their most recent report to investors, they stated that they have “secured substantial long-term oil transportation capacity with commitments covering more than half the company’s expected 2018 operated production and nearly all of its projected operated production by late 2019.”

Operating primarily in the Delaware Basin in West Texas and New Mexico as well as in Northeast Colorado and the Gulf of Mexico, Anadarko currently produces approximately 643,000 barrels per day and expects that number to increase to an average of 658,000 to 685,000 barrels per day for the full year 2018.

Having soundly beat analyst estimates in the most recent quarter, reporting revenues of $3.045 billion and earnings of $0.52/share, 3% and 21% higher than the Zacks Consensus respectively, the company is now expected to earn $2.73/share in 2018, an increase of 75% over just the past 90 days. Thanks to accelerating earnings estimates, APC is a Zacks Rank #1 (Strong Buy).

APC is also adept at hedging commodity prices effectively, reporting $141M in gains on commodity derivatives in the most recent quarter.

Investors have rewarded the shares which are up 30% YTD versus a return of just 6% for the Oil-Energy market as a whole.

Anadarko very effectively returns cash to shareholders in the form of a 1.4% dividend and is also currently in the midst of an announced $3B share repurchase program.

In a period of strong global economic growth and uncertain foreign oil production, especially from Venezuela and Iran, steadily growing U.S production is a sound investment and Anadarko Petroleum is one of the best of the best.


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