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Anadarko Misses on Earnings, Beats Revs

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Anadarko Petroleum Corp. (APC - Free Report) posted net earnings from continuing operations of $1.13 per share for the third quarter of 2013, falling behind the Zacks Consensus Estimate by 4.2%. However, earnings saw a 34.5% upswing from the year-ago quarter.

Accelerated production from the U.S. domestic plays as well as from the El Merck oil prospect in Algeria was the primary earnings driver.

On a GAAP basis, Anadarko Petroleum reported earnings of 36 cents per share versus 24 cents per share in the year-ago quarter. The disparity between operating and GAAP earnings was due to a 1 cent impact from third-party well and platform decommissioning obligation, a 1 cent gain from divestitures, a 74 cent charge from impairments, a 4 cent loss from unrealized derivatives, and a 1 cent charge from deepwater horizon settlement and related costs.

Total Revenue

Revenues of $3.9 billion in the quarter surpassed the Zacks Consensus Estimate by 2.4% as well as the year-ago figure of $3.3 billion. The year-over-year growth in revenue was mainly due to a 31.3% and 10.7% jump in natural gas and liquids sales, respectively.

Operational Highlights

Anadarko Petroleum's sales volume in the quarter rose to 71 million barrels of oil equivalent (MMBOE) from the corresponding year-ago level of 68 MMBOE. This was primarily due to staggering production from the Wattenberg, Eagleford as well as East Texas horizontal assets.

Favorable activity in the Delaware Basin of West Texas also contributed to the production growth.

Realized prices for crude oil and condensate, natural gas and natural gas liquids averaged $106.05 per barrel (up 6.1%), $3.33 per thousand cubic feet (up 24.7%) and $38.49 per barrel (up 7.1%), respectively, in the reported quarter.

Total operating cost shot up 25.8% year over year to $3,164 million mainly due to a 14.9% and 17.3% respective increase in oil and gas operating expenses as well as gathering, processing, and marketing overheads.

Cost escalation outweighed the revenue upsurge leading to a 15.6% plunge in operating profit to $689.0 million from the year-ago period.

Interest expense during the quarter was $177 million, lower than $185 million in the year-ago quarter.


Cash and cash equivalents as of Sep 30, 2013, were $3.9 billion versus $2.5 billion as of Dec 31, 2012 aided by the $2.64 billion proceeds that Anadarko gained from the sale of 10% working interest in the Mozambique Offshore Area 1.

Long-term debt as of Sep 30, 2013 was $13.6 billion versus $13.3 billion as of Dec 31, 2012.

Cash flow from operations in the third quarter of 2013 was $1.8 billion versus $2.2 billion in the year-ago quarter.

Capital expenditure during the quarter was $2.3 billion, increasing from $1.8 billion in the year-ago period.


Anadarko Petroleum expects sales volume in the fourth quarter in the range of 70–73 MMBOE. For full year 2013, the company revised its volume guidance to 281–284 MMBOE from the prior 281–287 MMBOE.

Marketing and gathering margins for the fourth quarter and 2013 are expected in the band of $40–$50 million and $140–$150 million, respectively.

General and administrative expenses for the fourth quarter and 2013 are estimated in the range of $275–$325 million and $1.05–$1.1 billion, respectively.

Anadarko Petroleum plans capital expenditure for the fourth quarter and full year 2013 in the vicinity of $2.1–$2.3 billion and $7.4–$7.6 billion, respectively.

Other Releases

Noble Energy Inc. (NBL - Free Report) reported adjusted earnings per share of 97 cents for the third quarter 2013, edging out the Zacks Consensus Estimate by 1.04%.

EXCO Resources Inc. reported third quarter 2013 adjusted earnings of 4 cents per share, missing the Zacks Consensus Estimate of 10 cents.

Murphy Oil Corporation (MUR - Free Report) posted third-quarter 2013 earnings of $1.34 per share from continuing operation, below the Zacks Consensus Estimate of $1.49 by 10.1%.

Our View

Anadarko’s earnings streak came to an end in the third quarter of 2013 as its bottom line floundered on rising expenses. However, earnings witnessed a sharp climb year over year.

The company’s series of exploration ventures in the resource-rich Gulf of Mexico and encouraging production activities from the U.S. onshore operations will continue to lend upside to earnings. In addition, Anadarko’s ambitious Lucius development project is on schedule which will spur the company’s reserve trajectory in the coming years.

Anadarko Petroleum Corp. presently retains a Zacks Rank #3 (Hold).

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