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Anadarko (APC) to Benefit from Premium Shale Properties

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We issued an updated research report on Anadarko Petroleum Corporation . The company is primarily engaged in the exploration, development, production, gathering, processing and marketing of natural gas, crude oil, condensate and natural gas liquids (NGLs).

What’s Driving the Stock?

Anadarko Petroleum’s premium shale properties, which are located in the Delaware and Denver-Julesburg (DJ) basins along with the Deepwater Gulf of Mexico (GOM), are expected to be the key drivers. The company is gradually shifting to a greater liquid composition in its total production mix, which has resulted in highest per-barrel margins since 2014.

Anadarko Petroleum has been systematically selling non-core properties since 2004 to focus on high-return domestic assets and achieve capital efficiency. The company exceeded monetization target of assets worth $4 billion in 2016. In 2017, the company closed more than $4 billion in asset divestitures. It received $371 million from the divestiture of its non-operated interest in Alaska.

Anadarko Petroleum has raised capital expenditure guidance for 2018 in the range of $4.5-$4.8 billion from the prior expectation of $4.2-$4.6 billion. The company will invest nearly 85% of planned capital expenditure in three U.S. development areas. Planned capital expenditures are likely to deliver a three-year 10-14% compounded growth rate for oil. The ongoing improvement in oil prices will help the company multiply benefits as the volume of oil production is likely to increase.

However,intense competition, changing laws and regulation as well as failure in adding commercially viable assets are tailwinds.

In the last four quarters, Anadarko Petroleum reported an average earnings surprise of 118.36%. It is expected to release third-quarter earnings on Oct 30, 2018. Other companies from the same industry like Penn Virginia Corp. , Murphy Oil Corp. (MUR - Free Report) and Apache Corp. (APA - Free Report) have pulled off positive earnings surprises of 14.96%, 96.50% and 75.77% in the past four quarters, respectively.

Penn Virginia is expected to release third-quarter results on Nov 14. Murphy Oil is expected to release third-quarter earnings on Nov 7. Apache is expected to release third-quarter earnings on Oct 31.

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