On Mar 13, we issued an updated research report on
Anadarko Petroleum Corporation
). The big player in the Independent Oil & Gas space promises
steady growth with its exploration activities in the U.S. Gulf of
Mexico and other international locations. However, downside
factors like volatility in commodity prices and unplanned outages
temper our expectations.
Anadarko failed to post impressive Q4 financial results with its
top line and bottom line lagging our expectation and edging down
year over year. The drop came from lower revenues and higher
expenses. 2013 revenues, however, improved from higher sales
pitched in by natural gas, oil and condensate, and natural gas
Anadarko Petroleum, a Zacks Rank #3 (Hold) stock, is committed to
carrying out its worldwide exploration, appraisal, and
development programs. For 2014, Anadarko raised its capital
expenditure target to $8.1-$8.5 billion, a major portion of which
will be utilized to develop the U.S. onshore assets.
We note that reserve replacement is a key for survival for
exploration & production companies. Anadarko Petroleum has
shown an increase of 21.2% in its proved reserves over the last
five years, which is a favorable signal.
Stable cash flow is inevitable for better financial health.
Anadarko Petroleum continues to improve its cash balance and
exhibit efficiency in terms of improving operating cash flow. The
company's initiative towards reducing its long-term debt level is
a positive move towards creating value for its shareholders.
However, volatility in prices of oil, natural gas and natural gas
liquids can cloud over the operational results of the company.
The uncertainty in the movement of energy prices affects both the
top and the bottom line of the company.
Other challenges include political risk from operating in
international locations and natural catastrophic events to which
all oil and gas companies are vulnerable to.
Key Picks from the Sector
Other better ranked stocks in this industry include
Range Resources Corp.
Warren Resources Inc.
Abraxas Petroleum Corp.
). While Range Resources and Warren Resources carry a Zacks Rank
#1(Strong Buy), Abraxas Petroleum holds a Zacks Rank #2
ANADARKO PETROL (APC): Free Stock Analysis
ABRAXAS PETE/NV (AXAS): Free Stock Analysis
RANGE RESOURCES (RRC): Free Stock Analysis
WARREN RSRCS (WRES): Free Stock Analysis
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