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Anadarko Petroleum (APC) Gains From Focus on Domestic Assets

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Anadarko Petroleum (APC) Gains From Focus on Domestic Assets

Anadarko Petroleum (APC) continues to gain from its focus on domestic assets, and share the benefits with its shareholders through share buybacks and dividend.

Anadarko Petroleum Corporation APC continues to benefit from its focus on domestic reserve-rich assets. The company’s premium shale properties, which include the Delaware and Denver-Julesburg basins, and the Deepwater Gulf of Mexico, are assisting it in increasing production volumes.

However, rising competition and modification in laws and regulations regarding hydraulic fracturing, or other oil and natural-gas operations could raise costs.

Investment in Liquid-Rich Asset Helps

Anadarko Petroleum’s strategy to increase oil and liquids production mix continues to yield positive results. In the last reported quarter, oil comprised 57% of its total sales volume mix compared with about 52% in the second quarter of 2017. Also, total liquids volume improved to 73% from 67% a year ago.

To focus on its high-return domestic assets and achieve capital efficiency, Anadarko Petroleum has been systematically selling its non-core properties since 2004. The sale proceeds help the company to further develop its core operations.

It is investing a major portion of its planned capital expenditure in three U.S. development areas. Focus on these areas is likely to further improve oil production of the company from the present levels.

Share Buyback & Debt Reduction

In addition to overall increase in operational efficiency, the company is utilizing its free cash flow to increase the value of its shareholders. During the second quarter, Anadarko Petroleum completed its initial share repurchase authorization of $3 billion. In July, the board of directors authorized another $1-billion hike in its share repurchase program, for shares to be repurchased by June 2019. Management also hiked quarterly dividend rate by 400% in February 2018.

Anadarko is also lowering its debt levels to further strengthen the balance sheet. It presently has a $1.5-billion debt reduction program, which will strengthen its balance sheet and lower annual interest expenses, positively impacting margins.

Zacks Rank & Key Picks

Anadarko Petroleum currently holds a Zacks Rank #3 (Hold). You can see  the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the same industry are Denbury Resources Inc. DNR, Northern Oil and Gas, Inc. NOG and Viper Energy Partners LP VNOM, each carrying a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for Denbury Resources, Northern Oil and Gas, and Viper Energy Partners has moved up 17.5%, 19.5% and 85.4%, respectively, in the past 30 days.

All the stocks have surpassed the broader industry’s growth in the past 12 months.

 



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