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Anadarko Beats EPS, Lags Sales

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Anadarko Petroleum Corporation (APC - Free Report) posted net earnings from continuing operations of 91 cents per share in fourth quarter 2012, beating the Zacks Consensus Estimate of 70 cents by 30% and the year-ago earnings of 85 cents by 7%.

On a GAAP basis, Anadarko reported earnings of 40 cents in the fourth quarter versus the year-ago net loss of 72 cents per share. The difference between operating and GAAP earnings during the quarter was due to the impact of a few one-time items, charges and gains, during the quarter.

Numbering among the charges were impairments of 28 per share, 8 cents from changes in tax positions, a 9 cent loss from interest rate swaps, 10 cents on divesture and 16 cents related to general partner appreciation rights. The company registered a gain of 20 cents from derivatives.

For the full year 2012, Anadarko earned $4.74 per share, beating the Zacks Consensus Estimate by 42% and the year-ago earnings by 40.6%.


Revenue of $3,410 million in the quarter missed the Zacks Consensus Estimate by $2 million. The results were down by 11.2% year over year mainly due to lower realized prices of the product sold.

Revenue in 2012 was $13,411 million, falling short of the Zacks Consensus Estimate by $47 million. Total revenue in 2012 was 4% lower than the prior year.

Proved Reserves

Anadarko replaced 162% of is proved reserve in 2012. The company’s net proved reserves at year-end 2012 totaled 2.56 billion barrel of oil equivalent (BOE), adding about 434 million barrels of oil equivalent (MMBOE) during 2012.

74% of the estimated proved reserves have been categorized as proved developed and the balance as proved undeveloped. At year-end 2012, Anadarko’s product mix of proved reserves consisted of roughly 54% natural gas and 46% liquids.

Operational Highlights

Sales volumes in the quarter improved 8% to 68 million barrels of oil equivalent (MMBOE) or 741 thousand BOE per day (MBOE/d). The increase was due to higher sales volume in all product categories offered by the company. Anadarko’s sales volumes in 2012 reached a record of 268 MMBOE or 732 MBOE per day, up 8.1% from 2011 levels.

Realized prices for crude oil and condensate, natural gas and NGL averaged $97.74 per barrel (down 6.8%), $3.28 per thousand cubic feet (down 4.4%) and $38.97 per barrel (down 29.5%), respectively, in the reported quarter. Oil, natural gas and NGL realized prices for the full-year came in at $102.35 per barrel (up 0.1%), $2.68 per thousand cubic feet (down 30.8%) and $40.44 per barrel (down 25%), respectively.

Interest expense during the year was $742 million, down 13% from $839 million a year ago. The reduction in the year-end debt level led to the reduction in interest expenses.

Costs incurred in 2012 for oil and natural gas exploration and development activities were $6.358 billion versus $5.561 billion in 2011.


Cash and cash equivalents of the company as of Dec 31, 2012, were $2.47 billion versus $2.69 billion as of Dec 31, 2011. Despite repayment of debts, collection of $1 billion associated with the Algeria exceptional tax resolution boosted the cash balance of the company.

As of Dec 31, 2012, Anadarko had total outstanding debt of $13.26 billion versus $15.23 billion at the end of the prior year. The debt-to-capitalization ratio of 39% at year end was lower than the previous year-end level of 46%. During the year Anadarko repaid its $2.5 billion revolving credit facility.

Cash flow from operating activities in 2012 was $8.4 billion compared with $2.5 billion in the prior year.

Capital expenditure of the company during the year was $7.31 billion, reflecting a 11.6% increase from $6.55 spent in 2011.  

Other Oil & Gas Company Releases

ConocoPhillips (COP - Free Report) reported earnings of $1.43 per share in the fourth quarter, beating the Zacks Consensus Estimate by 2 cents. Occidental Petroleum Corporation (OXY - Free Report) reported earnings of $1.83 per share in the fourth quarter, surpassing the Zacks Consensus Estimate of $1.66 for the quarter.

Our View

The company was able to register higher sales volume but the lower realized price of its product totally offset the benefit of volume growth. The depressed natural gas price environment in North America had a negative impact on the top line.

Anadarko is working consistently to improve it overall production portfolio. Besides developing fields in the Gulf of Mexico region, the company is focusing mainly in reserve rich Africa. The Mozambique operation is the most prominent among its African finds. The company also has interest in Kenya, Ghana, Cote d’ Ivoire and Algeria.

A significant portion of Anadarko’s offshore operations are based in Africa. The political instability in various African nations could lead to disruption of operations. Anadarko has a Zacks Rank #3 (Hold). We currently have a Zacks Rank # 1 (Strong Buy) on Cabot Oil and Gas Corporation (COG - Free Report) , which is slated to release its fourth-quarter results on Feb 21, 2013.

Based in The Woodlands, Texas, Anadarko Petroleum is primarily engaged in the exploration, development, production, gathering, processing and marketing of natural gas, crude oil, condensate and NGLs.  With a market cap of $40.23 billion, the company has 4,800 full time employees.

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