Anadarko Petroleum Corporation (NYSE:APC) reported a 70% decline in net income for Q1 from $716 million last year. However net income was impacted by $256 million hedging related costs during Q1 ’11 vs. a $588 million gain in Q1 ’10, which muddies the picture some. Excluding such items as hedging losses, profit for Q1 2011 was $896 million and points to strong tailwinds from high oil and gas prices as Anadarok as well as competitors like Exxon Mobil (NYSE:XOM), BP (NYSE:BP), ConocoPhillips (NYSE:COP) and Chevron (NYSE:CVX) benefit from the recent surge in commodity prices.
We have a price estimate of $75.32 on Anadarko’s stock, roughly inline with the market price.
Anadarko posted a 3.5% increase in Q1 2011, revenues to $3.25 billion from $3.1 billion in Q1 2010, and most of the that increase came from 26% jump in the average realized prices of crude oil and condensates. The company sold 19 million barrels of crude oil and condensates at an average price of $94.85 per barrel compared to the 20 million barrels at an average price of $75.18 per barrel during Q1 2010.
Several factors such as the: 1) the increasing pace of economic recovery, 2) the increase in global demand for oil, and 3) the unrest in the Middle East and North Africa contributed to the rise in crude oil prices during the quarter.
Apart from crude oil and condensates, Anadarko’s natural gas liquids (NGL) sales increased 16% to 7 million barrels because of higher production from Wattenberg in the Rockies and at the Maverick basin in the Southern and Appalachia Region. The average prices of NGLs also increased by 5% to $48.86 per barrel.
We expect sales volume and average sales price of crude oil and condensates and NGLs to continue through the rest of 2011 and help support the stock. You can see the contribution of oil (56%) and gas (31%) on the company in a recent note.