We reiterate our Neutral recommendation on
Anadarko Petroleum Corporation
). The company's varied asset base comprising unconventional
resources ensures its growth over the medium to long term.
Its low risk and predictable production profile, as well as
speedy execution of high-impact projects, reflects its visible
upside potential. This is apparent from its first quarter earnings
which increased to 92 cents per share from 72 cents per share
earned in the year-ago quarter.
Anadarko's profitability is nevertheless exposed to volatile and
cyclical oil, natural gas and NGL prices. Moreover, Anadarko's
failure to add to its reserves or to recover economically viable
assets limits development activities both offshore and onshore.
On the bright side, the company optimizes its stock portfolio by
engaging in strategic acquisitions and diversification activities.
Its recent discovery of light oil in the Cote d'Ivoire region of
Africa proves that it is continuously undertaking expansion
activities. Additionally, the company's strong financial position
is anticipated to aid in the smooth functioning of its projects and
strengthen its profitability in the coming years.
Negatives that might impede the company's growth include
exposure to unexpected natural disasters, higher oil field service
costs and regulatory hurdles. Also, foreign operations are
influenced by political and economic uncertainties which constrain
progress of the existing programs. Capital market insecurities can
thwart purchase and leasing obligations leading to operational
The company has outstripped our top and bottom line estimates in
the first quarter of 2012. On a year-over-year basis, revenue
increased by 6.1% to $3.45 billion.
The Zacks Consensus Estimates for the second quarter and fiscal
2012 are currently pegged at 90 cents per share and $3.93 per
Anadarko currently retains a Zacks #3 Rank which translates into
a short-term Hold rating. The company's peers include
Chesapeake Energy Corporation
Based in the Woodlands, Texas Anadarko Petroleum Corporation
engages in exploration, development, production and marketing of
natural gas, crude oil, petroleum and natural gas liquids. Its
operations are spread across the U.S. and in East and West Africa,
Algeria, China, Alaska and New Zealand.
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ANADARKO PETROL (APC): Free Stock Analysis
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