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Anadarko Petroleum Corporation Message Board

  • Emperical Emperical Dec 10, 2007 2:37 PM Flag

    Target Price?

    Anyone have an idea for a target price for 2008? With a p/e <6, new discovery, etc. it would seem the average analysts traget of $65 is much too low.

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    • natural gas is going higher short run, maybe shale gas will drive it down eventually, but I doubt is as coal tech won't ever happen, and nukes won't either. We'll be using more nat gas for a long time. Oil won't go down much as extraction prices keep coming up, though the margins might shrink a bit.

    • MStar continued
      ---
      We are raising our fair value estimate for Anadarko to $71 per share from $59 to reflect our recently raised oil price forecast and higher assumed production growth. While Anadarko is primarily a natural-gas company, oil represents about a third of overall production. In our discounted cash-flow model, we assume benchmark oil prices of $86 per barrel in 2008, $71 in 2009, $66 in 2010, $68 in 2011, and $71 in 2012. To help alleviate some commodity price risk, Anadarko hedged a considerable amount of production after the Western Gas and Kerr-McGee transactions. Those hedges will protect the company against a sharp drop in oil and natural-gas prices, but they shouldn't provide much additional value based on our current benchmarks. One of the biggest drivers of our fair value estimate is our production growth assumptions. We currently assume production growth of about 6.5% annually from 2009 to 2011. All else being equal, if we increase our growth assumptions to 9% annually, our fair value increases to $77 per share. Likewise, if we assume 4% production growth, it translates into a fair value of $65.

      Risk

      As with all oil and gas companies, Anadarko faces environmental and terrorist risk. With 84% of its assets in North America, Anadarko's political risk is minimal. Anadarko is making a big bet on domestic natural-gas prices with its purchase of Kerr-McGee and Western Gas. This makes Anadarko susceptible to a large and sustained drop in natural-gas prices. Management has mitigated this risk by hedging a large proportion of the production acquired in the two deals.

    • I would suggest focusing on a measure of cashflow rather than earnings as cashflow is much more relevant to E&P companies. A couple of suggestions would be Price / EBITDA or Market Enterprise Value (MEV) / EBITDA. After calculating these measure compare to numbers for similar companies such as CHK, DVN, or APA to get a feel for how Anadarko stacks up versus its peers. Of course, these our historical measures so they need to be tempered by: (1) one's assessment of future operating results, and (2) things such as unbooked reserves. I hope this helps

      • 1 Reply to peaceful_valley59
      • One has to consider macroeconomic trends. With the subprime mortgage mess getting worse and worse, I figure a recession is looming at some point, don't ask me when. That wouldn't exactly be bullish for crude oil.

        Also, one must consider seasonal factors. If you look at three years of daily prices at stockcharts dot com, or elsewhere, you will see that there is almost allways a seasonal low sometime between March and May. This is due to what is called the 'shoulder season'. It falls between peak energy consumption seasons of Winter heating and Summer driving.

        I look to take a little profit in the next couple of months and buy back in April or May, hopefully lower, lol. IMHO, pipe

    • 2008 Target price is around $78

 
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