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Anadarko Rises on Hopes of Exxon Mobil Acquisition - Analyst Blog

By: Zacks.com
Posted: 6/12/2014 5:24:00 PM
Referenced Stocks: NGL;EIA;XOM;APC;BP

As per the market sources, independent oil and natural gas exploration and production (E&P) company Anadarko Petroleum Corp. ( APC ) may be acquired by the energy giant Exxon Mobil Corp. ( XOM ). After the market rumor, the trading volume of Anadarko Petroleum jumped 211.6% to 11,688,364 on Jun 11, 2014 from its last 10 days average volume.

Shares of Anadarko Petroleum hit its 52-week high of $109.00 on Jun 11, 2014 following the news. Finally, the share price closed at $108.32, up roughly 4.2% from the previous day's closing.

Is Anadarko a Buyout Candidate?

There are several factors which could make Anadarko Petroleum a very attractive take-over target for energy biggies like Exxon Mobil, Chevron Corporation ( CVX ), BP plc ( BP ) and several others.

Anadarko Petroleum is engaged in exploration, development, production, gathering, processing and marketing of natural gas, crude oil, condensate and natural gas liquids (NGL). The company's operations are strategically located in several mineral-rich areas, including the Rocky Mountain region, the Appalachian Basin and the deepwater Gulf of Mexico (GoM).

In addition, Anadarko Petroleum is also active in numerous international locations like Brazil, Ghana, Indonesia, Liberia, Mozambique and Sierra Leone. Anadarko Petroleum maintains a disciplined capital spending program to expand its domestic as well as overseas operations.

In first-quarter 2014, the company has increased estimated recoverable resource range at its operations in Offshore Area 1, Mozambique. Currently, the company plans to explore the immense resource prospects of the Eagleford, Wattenberg and WolfCamp basins.

The scheduled completion of the growth ventures along with obtaining positive drilling outcomes acts as value driver for reserve additions. At the end of 2013, Anadarko Petroleum had total proved reserves of 2,792 million barrels of oil equivalent (MMBOE). It consists 55% of natural gas, 30% of oil & condensates and 15% of NGL.

To Sum Up

Per a U.S. Energy Information Administration (EIA) report published in Jun 2014, the average consumption for global petroleum and other liquids will likely increase 1.4% year over to around 91.8 million barrels per day. Primarily, higher demand from China is expected to boost the future consumption level.

On the natural gas front, average total natural gas consumption is expected to be 72.5 billion cubic feet per day in 2014. Higher demand from the industrial sector on the back of an improvement in manufacturing sector may lead to a 1.7% year-over-year rise in 2014 natural gas consumption.

Anadarko Petroleum's reserves are well-positioned to meet increasing customer demand. So, the natural gas weighted assets of Anadarko Petroleum will allow the buyer to reap benefits of a natural gas boom worldwide.

Anadarko Petroleum has resolved the Tronox case. This has removed the legal burden from the company, thus making it more lucrative for the acquirers.

We believe that Anadarko Petroleum's well-diversified portfolio of properties backed by steady exploration activities, asset realignment program through systematic divestitures, strong proved reserve base, a stable cash position and settlement of the Tronox case make it a favorable candidate for acquisition.

Anadarko Petroleum currently has a Zacks Rank #3 (Hold).


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