) released its Q4 earnings figures on Monday, February 4. The
notable highlights were Anadarko achieving a record production
growth rate of 8% over 2011 levels and adding reserves of 434
million barrels of oil equivalent(
), thus replacing 162% of its current production levels.
The company posted a quarterly profit of $190 million compared
to a net loss of $339 million in the comparable period last year.
The loss in Q4 2011 was primarily due to one time impairment
charges of $1.48 billion. For the full year, net income was $2.45
billion, as compared to the previous year's loss of $2.57 billion.
The loss in 2011 was mostly because of settlement charges of nearly
$4 billion arising from the Gulf of Mexico oil spill disaster.
While the average realized price for oil was lower in Q4
year-over-year, the difference was negligible for the full year.
However, the average realized prices for natural gas and natural
gas liquids (NGLs) were much lower in 2012, leading to lower
overall revenues than 2011.
Anadarko operates in three segments: oil & gas exploration
and production, midstream, and marketing. Its asset portfolio
includes positions in onshore resource plays in the Rocky Mountains
region, the southern United States, and the Appalachian basin. The
company is also an independent producer in the deepwater Gulf of
Mexico and has production and exploration activities globally,
including positions in high potential basins located in East and
West Africa, Algeria, China, Alaska, and New Zealand.
Click here for our full analysis of Anadarko
Higher Sales Volumes Boost Oil Revenues
Annual quarter sales volumes rose 8% year-over-year to 732,000
BOE a day. Total sales volume for the year stood at 268 million BOE
compared to 248 million BOE last year. Most of the production
increase was attributed to Anadarko's ramp up of operations in
liquids-rich shale regions. Anadarko has operations in major
shale fields such as South Texas Eagle Ford shale, the Marcellus
shale in the U.S. Northeast, and the Haynesville shale in
It increased its net resources in the region to more than 600
million BOE. Of these, oil and natural gas liquids constitute 65%.
Also, the company claims that its net resources in the Wattenberg
region stand between 1-1.5 billion BOE. ((
Goldman Sachs Energy Conference Presentation
, Anadarko Website))
As a result of increased volumes, revenues from oil sales
increased to $8.7 billion from $8.1 billion in 2011. On the other
hand, the abundance of gas resulted in lower natural gas prices
that impacted revenues. Prices for NGLs dropped drastically in 2012
mainly due to high prior inventories of ethane and propane and a
comparatively warmer winter in major consumption centers.
Ongoing Projects And Assets
Anadarko has also been successful in discovering huge gas
reserves off the coast of Mozambique in the Rovuma
basin. Recoverable gas reserves have been estimated anywhere
between 35-65 trillion cubic feet.
Anadarko is the operator of Offshore Area 1 where these reserves
are located and holds a 36.5% share of the fields. It acknowledged
in the earnings conference call that it is open to selling 10% of
its stake if the valuation is right. A potential stake sale
would make sense because it is expected that another $20 billion of
capital expenditure will be needed for the project. Anadarko
already has a huge debt on its balance sheet, which it has managed
to reduced to $13.2 billion this year by monetizing assets.
A huge challenge in this project is to build facilities on
land to turn the reserves into liquefied natural gas, which can
then be shipped to markets. Anadarko plans to build two LNG
plants in Cabo Delgado in the first phase, each capable of
processing five million tonnes of gas a year. The first sale of
this gas is expected to occur sometime in 2018.
Anadarko has oil and natural gas production and development
operations located in Algeria, Ghana, and China. The company also
has exploration acreage in Ghana, Brazil, Liberia, Sierra Leone,
Kenya, Cote d'Ivoire, New Zealand, Indonesia, and other countries.
In Brazil, Anadarko has assets in the Campos Basin, where
Wahoo and Itaipu are its biggest discoveries. Itaipu is believed to
contain up to 300 million barrels of oil. However, it sold off
its 30% stake in the ES-M-661 offshore block located in
the Espirito Santo basin to Petrobras. We analyzed this deal in
detail in an earlier article. You can read about it here.
Much of the company's valuation is based on its recent
discoveries in Mozambique, Ghana and the U.S. Gulf of Mexico (GoM).
We expect Anadarko to ramp up the output over the next several
years as it begins production from these discoveries. Anadarko
could also look to sell its stake in some of these discoveries to
immediately monetize their potential.
Anadarko's overall asset portfolio looks good and we think that
it provides sufficient long-term growth opportunities to the
company. The company is expected to shed more light on its capital
expenditure program two weeks from now.
We have a price estimate for Anadarko of $81, which will be
revised shortly in view of the latest earnings results.
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