Anadarko Sells Minor Stake in Lucius

Zacks

Independent oil and gas producer Anadarko Petroleum Corporation (APC) entered into an agreement with an undisclosed party to develop its deepwater Lucius oil & natural gas project in the Gulf of Mexico (GoM). The company has sold a 7.2% working interest of its Lucius development project and in return will receive $556 million.

The Lucius project is positioned 230 miles off the GoM shore. Although Anadarko’s share declined to 27.8% from 35%, it is still the major operator of the project. The ancillary partners include Plains Exploration & Production Company (PXP), Exxon Mobil Corporation (XOM), Apache Deepwater LLC, a subsidiary of Apache Corporation (APA), Petrobras (PBR) and Eni S.p.A (E).

The sale proceeds will serve the purpose of meeting capital needs of the project for the first stage of production. Production is expected to come online in the latter half of 2014.

An estimated capacity of 80,000 barrels of oil per day (boe/d) and in 450 million cubic feet of natural gas per day is anticipated to be produced from Lucius. The success of this project will positively add to its already impressive record of executing high-impact projects and strengthening its overall portfolio.

Anadarko on earlier occasions has leveraged its strong acreage position in other resource plays. It received $400 million and $1.55 billion from its joint ventures at its Salt Creek oil field and Eagleford Shale.

Anadarko Petroleum presently retains a Zacks #3 Rank, which translates to a short-term Hold rating. The company posted 8% sales growth in the first quarter of 2012, with GoM contributing sales volumes of roughly 119,000 boe/d. Earnings of 92 cents per share were also comfortably ahead of the Zacks Consensus Estimate of 83 cents in the quarter.

The company estimates sales volume for the second quarter and 2012 to be in the range of 64,000–66,000 boe/d and 258,000–262,000 boe/d, respectively.

We view the Lucius project will further enhance Anadarko’s goal of providing profitable and sustainable returns to its stakeholders in the long run. However, threats related to unexpected accidents during drilling could hamper or delay operations.

Based in Woodlands, Texas, Anadarko Petroleum is primarily engaged in the exploration, development, production, gathering, processing and marketing of natural gas, crude oil, condensate and NGLs.

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