We maintain our Neutral recommendation on Texas-based oil and
natural gas exploration company,
Anadarko Petroleum Corporation
(
APC
). The company posted mixed results in the second quarter 2012 with
earnings surpassing the Zacks Consensus Estimate while sales
falling short of it. Reported earnings per share in the second
quarter were 85 cents which lagged behind the prior-year figure of
$1.14 per share.
Lower realized prices of products sold were chiefly responsible
for the lackluster top-line performance in spite of volume
expansion. Nonetheless, recent forecasts reflect an uptrend in
retail natural gas prices in the US markets, which bode well for
top-line benefits going forward.
Anadarko's major natural gas discoveries at Golfinho and Atum in
offshore Mozambique and oil discovery in Côte d'Ivoire will aid in
the future growth prospects of the company. In addition, joint
ventures of about $1 billion related to the Salt Creek Enhanced Oil
Recovery project in Wyoming as well as in the deepwater Lucius
development in the Gulf of Mexico will fetch lucrative returns for
the company.
Conversely, Anadarko's operations are exposed to periodic risks
such as unexpected natural disasters, unplanned outages and higher
oil field service costs. The company's deep sea operations are time
consuming, contributing to lags in production and leading to
increased costs.
Operations on foreign soil could also be threatened by political
and economic uncertainties like war and civil unrest.
On a positive note, we believe Anadarko's deep and diversified
asset base provides the company with substantial growth potential
over the medium-to-long term. It has a proven track record of
identifying and executing high-impact projects which could act as
major growth driver.
However, a sluggish pace of the US macro-environment and failure
to fund its future capital requirements, acquisitions or
development activities and debt payments could limit growth
opportunities
Anadarko nevertheless revised its full year sales expectation on
the basis of its first half 2012 performance. Anadarko increased
its 2012 sales expectation by 3 million barrels to 261-265 million
barrels of oil equivalent (MMBOE) from the prior range of 258-262
MMBOE.
The Zacks Consensus Estimates for the third quarter and full
year 2012 are currently pegged at 70 cents per share and $3.43 per
share, respectively. The company's closest competitor is
ConocoPhillips
(
COP
).
Anadarko presently holds a Zacks #3 Rank implying a short-term
Hold rating. 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).
ANADARKO PETROL (APC): Free Stock Analysis
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CONOCOPHILLIPS (COP): Free Stock Analysis
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