Anadarko Misses Q4 Earnings & Revs

Zacks Equity Research
February 4, 2014

Anadarko Petroleum Corporation (APC) posted fourth-quarter 2013 adjusted earnings of 74 cents per share, missing the Zacks Consensus Estimate by 20.4%. Quarterly earnings were also 18.7% lower than the year-ago level, primarily due to a decrease in revenues, higher total costs and expenses and an increase in outstanding shares.

On a GAAP basis, the company reported a loss of $1.53 per share versus earnings of 40 cents per share. The variance between GAAP and adjusted earnings was due to the combined impact of losses on derivatives, divestitures, impairments, third-party property restoration and change in uncertain tax positions. In addition, contingent loss associated with the Tronox Adversary Proceeding and the deepwater horizon settlement and allied costs was also responsible for the aforesaid difference.

Annual GAAP earnings were $1.58 per share, down 66.7% from the year-ago earnings of $4.74 per share.

Total Revenue

Anadarko Petroleum’s total revenues of $3.3 billion in the quarter lagged the Zacks Consensus Estimate by 11.1%. Reported revenues edged down 2.1% year over year.

For 2013, total revenues were $14.58 billion, marginally missing the Zacks Consensus Estimate of $14.59 billion. On a year-over-year basis, the company’s top line increased 8.7% primarily on the back of higher natural gas, oil and condensate, natural gas liquids (“NGL”), and gathering, processing, and marketing sales.

Operational Highlights

In the quarter under review, Anadarko Petroleum's sales volume rose 8.8% year over year to 74 million barrels of oil equivalent (“MMBOE”), primarily on the back of strong contribution from the Wattenberg, Eagleford and East Texas /North Louisiana horizontal assets.

Favorable activity in the Wattenberg field, Eagleford Shale and East Texas/North Louisiana horizontal play, and first oil from the El Merck oil prospect in Algeria contributed to the production growth.

Realized prices for crude oil and condensate, natural gas and NGL averaged $99.20 per barrel (up 1.5%), $3.46 per thousand cubic feet (up 5.5%) and $40.30 per barrel (up 3.4%), respectively, in the reported quarter.

Anadarko Petroleum’s total costs and expenses climbed 6.9% year over year to $3,123 million, primarily due to an increase in oil and gas operating expenses and higher exploration expenses.

In fourth-quarter 2013, the company’s operating margin was 6.4%, down from the year-ago figure of 14.3%.

Interest expense during the quarter was $173 million, down 4.4% from the year-ago figure due to lower long-term debt burden.

Financial Update

Anadarko Petroleum's cash and cash equivalents, as of Dec 31, 2013, were $3.7 billion versus $2.5 billion as of Dec 31, 2012. Improvement in cash position was primarily due to the sale of working interest in the Mozambique Offshore Area 1, a divestment of non-operated interest in the Pinedale/Jonah field and sale of the carried-interest agreement in Heidelberg.

Long-term debt as of Dec 31, 2013 was $13.1 billion versus $13.3 billion as of Dec 31, 2012.

In 2013, Anadarko Petroleum's net cash provided by operating activities was $8.9 billion versus $8.3 billion in the prior-year comparable period.

Capital expenditure was $8.5 billion in 2013, increasing from $7.3 billion in the year-ago period.

Peer Comparison

Hess Corporation (HES) reported adjusted earnings of 96 cents per share in fourth-quarter 2013, lagging the Zacks Consensus Estimate of $1.09 per share.

Murphy Oil Corporation’s (MUR) adjusted earnings from continuing operations were 67 cents per share, missing the Zacks Consensus Estimate by 40.2%.

Occidental Petroleum Corporation’s (OXY) fourth-quarter 2013 pro forma earnings were $1.72 per share, beating the Zacks Consensus Estimate by 1.8%.

Our Take

Anadarko Petroleum failed to maintain its earnings surprise streak, as the company posted lower-than-expectation earnings in the reported quarter. However, the initiatives taken by the management to boost the exploration activity is appreciable.

Anadarko Petroleum currently engages in a series of exploration projects in the resource-rich Gulf of Mexico, the U.S. onshore operations and offshore Mozambique. We expect these initiatives to boost the company's performance going forward.

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

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