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Anadarko Beats Earnings, Gives Guidance

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Anadarko Petroleum Corporation (APC - Free Report) posted net earnings from continuing operations of $1.08 per share for the first quarter of 2013, breezing past the Zacks Consensus Estimate as well as the year-ago earnings by 17.4%.

Earnings outperformed on the back of higher contribution from Anadarko’s U.S. onshore assets, successful property sales and encouraging results from the deepwater Gulf of Mexico (GoM).

On a GAAP basis, Anadarko Petroleum Corporation reported earnings of 91 cents per share versus $4.28 per share in the year-ago quarter. The disparity between operating and GAAP earnings during the quarter of 17 cents was due to a 31 cent loss from unrealized derivatives, 4 cent impairment charges and an 18 cent gain from divestitures.

Total Revenue

Revenue of $3.9 billion in the quarter beat the Zacks Consensus Estimate by 11.3% and the year-ago figure of $3.4 billion. The year-over-year growth in revenue was mainly due to 40.8% and 5.9% upsurges in natural gas as well as oil and condensate sales, respectively.

Operational Highlights

Anadarko Petroleum Corporation's sales volume in the quarter rose 10.9% year over year to 71 million barrels of oil equivalent (MMBOE) or 793 thousand BOE per day (MBOE/d). This was primarily due to expansion in crude oil and natural gas production volumes in the U.S. and international operations.

Liquids sales averaged 345 MBOE/d, up 14.6% year over year. The increase was driven by the company’s five major U.S. onshore growth plays, namely, Wattenberg, Eagleford, Marcellus, East Texas HZ and Permian. Anadarko Petroleum Corporation also encountered first oil in the El Merck prospect in Algeria.

Realized prices for crude oil and condensate, natural gas and NGL averaged $102.97 per barrel (down 7.3%), $3.33 per thousand cubic feet (up 28.1%) and $38.17 per barrel (down 19%), respectively, in the reported quarter.

Total cost and expenses during the quarter were $2.6 billion, up a whopping 249.5% from the year-ago quarter. In the previous year quarter the company benefited from favorable adjustments relating to the Algerian profit tax settlement.

Operating income of Anadarko Petroleum Corporation fell 52.3% year over year to $1.3 billion. The cost inflation overshadowed the revenue growth leading to reduction in profit.

Interest expense during the quarter was $164 million, lower than $186 million in the year-ago quarter.


Cash and cash equivalents as of Mar 31, 2013, were $3.7 billion versus $2.5 billion as of Dec 31, 2012.

Long-term debt as of Mar 31, 2013 was $13.7 billion versus $13.3 billion as of Dec 31, 2012.

Cash flow from operations in the first quarter of 2013 was $2.5 billion versus $1.9 billion in the year-ago quarter.

Capital expenditure during the quarter was $1.7 billion, decreasing marginally from $1.8 billion in the year-ago quarter.

Guidance for 2013

Anadarko Petroleum Corporation expects sales volume in the second quarter and full year 2013 in the range of 67–69 MMBOE and 279–287 MMBOE, respectively.

Marketing and gathering margins for the second quarter and 2013 are expected in the band $25–$35 million and $150–$170 million, respectively.

General and administrative expenses for the second quarter and 2013 are estimated in the band $280–$290 million and $1.1–$1.2 billion, respectively.

Capital expenditure of Anadarko Petroleum Corporation for the second quarter and full year 2013 is projected in the vicinity of $1.7–$1.9 billion and $7.2–$7.6 billion respectively.

Other Exploration and Production Operators

Besides Anadarko Petroleum Corporation, other exploration companies recently posted earnings are:-

Ultra Petroleum Corporation (UPL - Free Report) reported earnings of 38 cents per share, surpassing the Zacks Consensus Estimate by 35.7%

Statoil ASA posted first quarter 2013 earnings of 66 cents per ADR, missing the Zacks Consensus Estimate of 75 cents.

Noble Energy Inc. (NBL) recorded earnings per share of $1.48, exceeding the Zacks Consensus Estimate by 21.3%.

Our View

Anadarko Petroleum Corporation sustained its good run posting yet another earnings surprise in the first quarter of 2013. The company’s pursuit of high-quality exploration prospects in the domestic as well as international markets acts as the key catalyst to growth.

The Shenandoah and Coronado oil plays in the GoM will be the principal production drivers in the coming quarters. El Merck will also add to Anadarko Petroleum Corporation's output basket. Going forward, the new discoveries of Phobos prospect in GoM and the natural gas reservoir in Mozambique have encouraging potential.

Despite the positives, expectation of depressed natural gas prices could prove to be a deterrent to growth. Moreover, failure to contain rising costs could curb profitability. Anadarko Petroleum Corporation presently retains a Zacks Rank #3 (Hold).

Based in The Woodlands, Texas, Anadarko Petroleum Corporation is primarily engaged in the exploration, development, production, gathering, processing and marketing of natural gas, crude oil, condensate and NGLs.

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