Anadarko Petroleum Corporation
(
APC
) posted net earnings from continuing operations of 85 cents per
share for the second quarter of 2012, surpassing the Zacks
Consensus Estimate of 77 cents but lagging the prior-year figure of
$1.14 per share.
On a GAAP basis, Anadarko reported a loss of 76 cents per share
in the second quarter versus earnings of $1.08 per share in the
year-ago quarter. The difference between operating and GAAP
earnings during the quarter was due to the impact of certain
one-time items, charges and gains, during the quarter.
Numbering among the charges were a 2 cent loss from divestiture,
$1.26 for impairments, 29 cents loss on derivatives, and 4 cents
related to accelerated depreciation of Gulf of Mexico assets.
Revenue
Revenue of $3.22 billion in the quarter missed the Zacks
Consensus Estimate of $3.42 billion and the year-ago figure of
$3.67 billion.
The year-over-year decline in revenue was mainly due to a 45.3%
drop in natural gas sales and 23.8% decline in natural gas liquid
sales from the prior-year quarter.
Operational Highlights
Sales volumes in the quarter improved 8% to 68 million barrels
of oil equivalent (MMBOE) or 742 thousand barrels of oil equivalent
per day (MBOE/d) from 61 MMBOE or 685 MBOE/d in the year-ago
quarter. The year-over-year rise was mainly due to higher natural
gas and oil and condensate sales volumes.
Liquids sales averaged 241 thousand barrels per day (MBbl/d), up
7% year over year. The increase was driven by the company's five
major U.S. onshore growth plays, namely Wattenberg, Eagleford,
Greater Natural Buttes, East Texas HZ and Marcellus Shale. Besides,
Caesar/Tonga in the deepwater Gulf of Mexico and increased volumes
resulting from the Algeria tax resolution benefited liquid sales
volume.
Realized prices for crude oil and condensate, natural gas and
NGL averaged $101.22 per barrel (down 7.1%), $2.15 per thousand
cubic feet (down 47.7%) and $40.41 per barrel (down 28.1%),
respectively, in the reported quarter.
Exploration costs during the quarter were $1.12 billion, rising
significantly from the prior-year level of $236 million. The rise
in exploration expenses yielded results as the company made
significant discoveries during the quarter.
Interest expense during the quarter was $190 million, lower than
$216 million in the year-ago quarter.
Financials
The company continues to have a strong cash position. Cash and
cash equivalents as of June 30, 2012, were $2.79 billion versus
$2.69 billion as of December 31, 2011.
Long-term debt of the company as of June 30, 2012 was $13.09
billion versus $15.06 billion as of December 31, 2011.
Cash flow from operations in the second quarter of 2012 was
$1.99 billion versus $1.83 billion in the year-ago quarter. Free
cash flow in the reported quarter was $142 million versus $126
million in the year-ago quarter.
Capital expenditure during the quarter was $1.8 billion,
increasing from $1.72 billion in the second quarter of 2011.
Guidance
The strong performance in the first half of the year prompted
the company to revise its full year sales expectation. Anadarko
increased its 2012 sales expectation by 3 million barrels to
261-265 MMBOE from the prior range of 258-262 MMBOE. The third
quarter sales volume is expected to be in the range of 65- 67
MMBOE.
Marketing and gathering margin for the third quarter and full
year 2012 are expected to be in the band of $20-$40 million and
$160-$180 million, respectively.
Minerals and Others for the third quarter and full year 2012 are
expected to be in the band of $30-$35 million and $145-$165
million, respectively.
General and administrative expenses for the third quarter and
full year 2012 are expected to be in the band of $290-$310 million
and $1.1-$1.2 billion, respectively.
Capital expenditure of the company for the third quarter and
full year 2012 is expected to be in the range of $1.65-$1.8 billion
and $6.6-$6.9 billion, respectively.
Peer Comparison
ConocoPhillips
(
COP
), which competes with Anadarko Petroleum, announced operating
earnings of $1.22 per share for the second quarter 2012, which
surpassed the Zacks Consensus Estimate of $1.17 per share. However,
earnings were down by almost 25.6% from the year-earlier profit of
$1.64, reflecting lower oil price realization, weak production
volume and the divestiture of its refining and pipelines
business.
ConocoPhillips's operating revenue of $15.17 billion in the
quarter slipped 14.1% from $17.67 billion reported in the year-ago
quarter. Revenues surpassed the Zacks Consensus Estimate of $9.89
billion.
Our View
During the quarter the company made significant natural gas and
oil discovery in Africa. Anadarko expects the discovery in offshore
Mozambique, the Golfinho/Atum complex to contain 10 to 30-plus
trillion cubic feet of natural gas. In West Africa, the company
made a light oil discovery in offshore Côte d'Ivoire (Ivory Coast)
in the CI-103 block. Anadarko has 40% working interest in the
CI-103 block.
During the quarter the company monetized a portion of its
holding in the Salt Creek field in Wyoming and the Lucius
development project in the Gulf of Mexico. For this, it received a
total fund of $956 million. The funds generated will be directed
toward the development of these projects and will increase
production capacity of the company, once these projects come
on-line.
Despite the expansion in volumes year over year, the results
this quarter were hurt by lower realized prices of the products
sold, which took a hit on total revenue.
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. The company presently retains a short-term Zacks #3 Rank,
which translates into a short-term Hold rating.
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