On Wednesday, August 7, Anadarko Petroleum (APC) announced a quarterly dividend increase of $0.09/share to bring its upcoming dividend payout to $0.18/share. It should be noted that this boost represents a 100% increase from its prior dividend of $0.09/share, which was paid on June 26. In the wake of Anadarko's dividend increase I wanted to not only examine the company's recent performance, but also take a look at several catalysts behind my decision to establish a long-term position in the company.
Anadarko Petroleum is broken up into three major businesses: oil & gas exploration and production, midstream, and marketing. Its current asset portfolio includes positions in a number of US-based onshore resource plays located in the Appalachian Basin as well as the Southern and Rocky Mountain regions of the country. APC is also an independent producer in the deepwater Gulf of Mexico and has production and exploration activities in a number of high potential basins located in both East and West Africa, as well as Algeria, China, Alaska, and New Zealand.
Performance and Trend Status
On Wednesday shares of Anadarko Petroleum -- which currently possess a market cap of $44.79 billion, a P/E ratio of 26.40, a forward P/E ratio of 16.90, and a forward yield of 0.81% ($0.72) -- settled at $89.23. Based on Wednesday's closing price, shares of APC are trading 0.62% below their 20-day simple moving average, 1.30% above their 50-day simple moving average, and 9.34% above their 200-day simple moving average. These numbers indicate minimal short-term downtrend and a minimal mid-term and long-term uptrend for the stock -- which generally translates into a buying mode for most traders.
A Strong Q2 Is Highlight By Key Areas of Growth
On Monday, July 29th Anadarko Petroleum Corp. reported the results of what I believe to be a very solid second quarter. The company's Q2 EPS of $1.05 /share beat street estimates by an impressive margin of $0.14/share even though its revenue of $3.50 billion missed street estimates by a margin of just $30 million. Although the company missed revenue expectations its performance was driven by an 8,000 boe/day increase its daily sales volume when compared to the same year-ago period (250,000 boe/day vs. 242,000 boe/day) and a total of five deepwater discoveries in the Gulf of Mexico and Mozambique.
According to Anadarko's Chairman, President and CEO Al Walker, "Anadarko's onshore activities delivered year-over-year oil growth of 25 percent, while continuing to significantly improve its drilling and completions programs, as well as maintain a number of key costs that were well within APC's expectations". Anadarko's ability to continue to reduce a number of the costs associated with such things as oil and gas operations and exploration will be a significant catalyst during the second half of the year. If APC can continue to reduce overall costs, as was the case during the second quarter (costs of $2.357 billion during Q2 2013 vs. costs of $3.501 billion during Q2 2012) I think APC has a very good chance of experiencing continued earnings growth over the next 12-24 months.
Recent Dividend Behavior
Since March 7, 2005 and up until June 10, 2013, Anadarko Petroleum has maintained its quarterly distribution $0.09/share. From an income perspective, the company's forward yield of 0.81% ($0.72) coupled with its continued cost reduction strategy make this particular stock a very viable income option for long-term investors in search of a conservative-yielding growth located in the heart of the independent oil & gas sector.
When it comes to those who may be looking to establish a position in Anadarko Petroleum Corp., I'd continue to keep a watchful eye on not only the company's dividend and earnings behavior over the next 12-24 months, but any growth directly related to company's proactive efforts to establish sustainable cost-cutting initiatives. If the company can continue to reduce costs while making significant strides in terms of the five deepwater discoveries that were noted during the quarter, I see no reason what shares shouldn't be trading in the $95/share to $102/share range.