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Anadarko Petroleum Issues '18 Capex & Sales Volume Guidance

Zacks Equity Research

Anadarko Petroleum Corporation APC recently announced 2018 capital expectations and sales volume guidance.

Notably, the company expects to spend approximately $4.2-$4.6 billion in the form of total capital investments in 2018. Total sales volume is estimated to be in the range of 245-255 million barrels of oil equivalent per day (MBOE/d) for 2018, while 385--405 million barrels of oil per day (MBOP/d) is expected for 2018.

Breaking Down 2018 Capex & Sales Program

Anadarko Petroleum expects to spend approximately $2.1 billion in U.S. onshore upstream, operations. Moreover, the company plans to invest approximately $1.1 billion in Deepwater Gulf of Mexico operations, $0.55 billion in Midstream, $0.35 billion in Exploration and LNG and $0.15 billion in International Operations.

Moreover, Anadarko Petroleum will allocate approximately $900 million in upstream activities in the Delaware Basin of West Texas, along with another $500 million midstream investment. Through this, the company is striving to integrate and strengthen its position in the region. Notably, these investment plans along with phased development approach in the basin will boost the company’s oil sales volume during the second half of 2018. The company plans to average seven operated rigs and six completion crews in 2018.

In the DJ Basin of northeast Colorado, the company plans to invest approximately $950 million in upstream activities in 2018. With this, the company expects a 30% increase in its 2018 oil sales volume, on a year-over-year basis.

Outside the United States, Anadarko Petroleum will invest more than $150 million toward its international cash-generating operations in Algeria and Ghana in 2018. On the other hand, the company expects to spend $200 million in exploration next year.

Our View

Anadarko Petroleum’s focus on liquid rich regions, premium shale properties in the Delaware and Denver-Julesburg basins and the Deepwater Gulf of Mexico (GOM) has led to high sales volume in the third quarter. We expect substantial investment in these areas to help the company witness similar sales volume growth in the upcoming quarters as well.

In line with this, of the company’s above mentioned 2018 investment, 80% is directed toward the Delaware and DJ basins, including midstream and the deepwater GOM. The company’s recently issued sales guidance for 2018 reflects a 14% year-over-year increase in oil growth, thereby indicating its success in driving capital efficiency and business growth.

Anadarko Petroleum’s announcement of strong 2018 guidance and capital expenditure program places it in strong competition with other Oil-Gas Exploration majors like Denbury Resources Inc. DNR, Noble Midstream Partners LP NBLX and Northern Oil and Gas, Inc. NOG.

Price Movement

Anadarko Petroleum has underperformed the industry in the last three months. The company’s shares have lost 14% compared with the industry’s decline of 16.3%.

The underperformance can be attributed to the increasing dry hole expenses that the company has been incurring in past few months, which in turn is affecting its margins.

Zacks Rank

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

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