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Will Anadarko's Shale Assets Counter Oil Price Downturn? - Analyst Blog

Zacks Equity Research

On May 14, 2015, we have issued an updated research report on Anadarko Petroleum Corporation APC. The company’s premium properties in the Wattenberg, Eagleford and Wolfcamp basins, and steady progress at the international and deepwater activities will likely boost production. However, Anadarko Petroleum’s profitability is exposed to volatile and cyclical oil, natural gas and NGL prices.

Anadarko Petroleum reported weak financials in the first quarter of 2015. The company incurred a wider-than-expected loss in the reported quarter while it had generated profits in the prior year. Moreover, revenues lagged the estimates and dropped year over year.

Woodlands, TX-based Anadarko Petroleum strives to expand its worldwide exploration, appraisal and development programs, which require sizable capital investments. In the first quarter of 2015, Anadarko Petroleum invested around $1.1 billion in exploration activities significantly higher than $299 million spent in the prior year. The company also made significant progress on international and deepwater activities and achieved first oil at Lucius.

In addition, Anadarko Petroleum’s premium domestic shale properties are expected to be the primary production drivers. These assets include Colorado’s Wattenberg and the Wolfcamp Shale, the Delaware Basin as well as Eagleford of Texas.

Apart from its core business mix of oil, natural gas and NGLs, Anadarko is judiciously utilizing its investments to expand its asset base to liquefied natural gas. The company is rapidly progressing on its Mozambique Gas Development Project.

On the downside, we are concerned about Anadarko’s exposure to volatile and cyclical oil, natural gas and NGL prices. Also, the competitive oil & gas industry could deter the company from achieving its targeted growth.

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

Stocks That Warrant a Look

Better-ranked stocks in the oil and gas space include Linn Energy, LLC LINE, Sanchez Energy Corporation SN and WPX Energy, Inc. WPX. All three stocks currently carry a Zacks Rank #2 (Buy).

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ANADARKO PETROL (APC): Free Stock Analysis Report
 
WPX ENERGY INC (WPX): Free Stock Analysis Report
 
SANCHEZ ENERGY (SN): Free Stock Analysis Report
 
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