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Anadarko Petroleum to Gain From Premium Shale Properties

We issued an updated research report on Anadarko Petroleum Corporation APC. The company will gain from its premium properties in Delaware and Denver-Julesburg basins, the Deepwater Gulf of Mexico (GOM) as well as the divestiture of non-core assets.

What’s Driving the Stock?

Anadarko Petroleum’s premium shale properties, which include the Delaware and Denver-Julesburg (DJ) basins as well as the Deepwater Gulf of Mexico were the primary production drivers during the third quarter and are expected to boost performance in the upcoming quarters.

Anadarko Petroleum is gradually shifting to a greater liquid composition in total production mix. This strategic shift and focus on liquid-rich regions have resulted in high sales volume and improved margin in the third quarter. The company’s shift of production toward higher-value oil has resulted in highest per-barrel margins since 2014.

To focus on high-return domestic assets and achieve capital efficiency, Anadarko Petroleum has been systematically selling non-core properties. On Nov 8 2018, the company announced to sell all remaining midstream assets for $4.015 billion to Western Gas Partners, LP (WES), with $2.0075 billion cash proceeds. The deal is expected to close in the first quarter of 2019.

In addition, the planned debt reduction will strengthen balance sheet and lower annual interest expenses, which will have a positive impact on margins.

However, strong competition from major integrated oil companies, adverse weather conditions as well as lack of physical and oilfield service infrastructure in deep-water areas along with changing laws and regulation may hurt Anadarko Petroleum’s performance.

Price Movement

Shares of Anadarko Petroleum have increased 11.4% in the past 12 months, against the industry’s decline of 14%.



Zacks Rank & Key Picks

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

A few better-ranked stocks from the same space are Cimarex Energy Co XEC, California Resources Corporation CRC and Energen Corporation EGN. While Energen sports a Zacks Rank #1, Cimarex Energy and California Resources carry a Zacks Rank#2 (Buy).

The Zacks Consensus Estimate of 2018 earnings for Cimarex Energy moved up 1.9% in the past 30 days. The company reported pulled off positive earnings surprise of 10.17% in the last four quarters.

The Zacks Consensus Estimate of 2018 earnings for California Resources moved up 12.8% in the past 30 days. The company delivered average positive earnings surprise of 149.57% in the last four quarters.

The Zacks Consensus Estimate of 2018 earnings for Energen moved up 2.5% in the past 30 days. The company came up with average positive earnings surprise of 18.62% in the last four quarters.

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