On Nov 26, 2013, we downgraded our recommendation on
Anadarko Petroleum Corp.
) to Neutral from Outperform. The oil and gas exploration as well
as production operator currently carries a Zacks Rank #3
Why the Downgrade?
The downgrade takes into account the company's spiraling
operating costs and volatility in oil and gas prices. Anadarko's
third quarter 2013 earnings lagged our expectations significantly
as profit declined 15.6% from the year-ago quarter.
These negative factors have been reflected in downward
estimate revisions. In the last 30 days, the Zacks Consensus
Estimate for 2013 decreased by 21 cents to $4.29 per share.
Causes of Concern
The renewed spurt of political conflict in Mozambique could
jeopardize the company's multi-billion dollar exploration
initiatives and might deter its future investment opportunities
in the region. Moreover, foreign exchange restrictions and
fluctuation in international currency relative to the U.S. dollar
are factors that might constrain the company's performance.
Furthermore, Anadarko's operations are subject to risks
related to unexpected natural disasters. The Colorado flood in
Sep 2013 affected Anadarko's activities leading to the shut-down
of 675 operated wells in the region. Its deep sea operations are
time consuming, resulting in lags in production which could lead
to increased costs.
However, the company's expanding interest in the Gulf of
Mexico's Coronado discovery and service startup of the Texas
pipeline asset are expected to lend substantial upside.
Other Stocks to Consider
Some better-ranked stocks in the same sector include
Abraxas Petroleum Corp.
Bonanza Creek Energy, Inc.
Matador Resources Company
). All these stocks presently hold a Zacks Rank #1 (Strong
ANADARKO PETROL (APC): Free Stock Analysis
ABRAXAS PETE/NV (AXAS): Free Stock Analysis
BONANZA CREEK (BCEI): Free Stock Analysis
MATADOR RESOURC (MTDR): Free Stock Analysis
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