Back to top

Anadarko Petroleum Thrives on Organic Growth and Buyouts

Read MoreHide Full Article

On Nov 14, 2016, we issued an updated research report on Anadarko Petroleum Corporation (APC - Free Report) . The company’s premium shale properties, which include the Delaware and Denver-Julesburg basins, and the Deepwater Gulf of Mexico, are expected to be the primary production drivers. However, modifications in laws and regulations, and competition from major integrated oil companies pose risks to the stock.

Recently, Anadarko Petroleum reported third-quarter 2016 adjusted loss of 89 cents per share, wider than the Zacks Consensus Estimate of a loss of 57 cents. Moreover, total revenue of $1,893 million missed the Zacks Consensus Estimate of $2,178 million by 13.1%. Reported revenues were, however, up 12.1% on a year-over-year basis.

In 2016, the company’s management estimates total oil sales volumes to be between 262 and 264 million barrels of oil equivalent (BOE).

In September, Anadarko Petroleum inked a deal to acquire Freeport McMoRan Oil & Gas’ deepwater GOM assets for a consideration of $2 billion in a bid to expand its operations in the region and gain additional scope for exploration. The transaction is anticipated to close by 2016 end.

This acquisition will double Anadarko Petroleum’s ownership in the Lucius development to 49% from 23.8%, enabling the company to leverage future value addition at Lucius and achieve over 400 million BOE in estimated recovery from the development. The acquisition is expected to generate an additional $3 billion free cash flow over the next five years.

On the flip side, the oil and gas business is subject to changes in laws and regulations regarding hydraulic fracturing or other oil and natural gas operations, which could raise Anadarko Petroleum’s costs. Moreover, imposition of additional operating restrictions or delays could adversely affect the company’s production and profitability.

Zacks Rank & Key Picks

Currently, Anadarko Petroleum carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the same space include Diamondback Energy, Inc. (FANG - Free Report) , Halcón Resources Corporation (HK - Free Report) and Noble Energy, Inc. (NBL - Free Report) .

Diamondback Energy has seen 12 upward estimate revisions over the last month for 2016. The stock sports a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

Noble Energy has seen nine upward estimate revisions over the last month for 2016. The stock carries a Zacks Rank #2 (Buy).

Halcón Resources, a Zacks Rank #2 stock, has seen one upward estimate revision over the last month for 2016.

Zacks’ Best Private Investment Ideas

In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?

Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>

More from Zacks Analyst Blog

You May Like