Buy Low, Sell High: Anadarko Is Cheap At $68

| About: Anadarko Petroleum (APC)

Anadarko Petroleum (NYSE:APC) is causing heads to turn with its recently released 2012 first quarter results. Some of these highlights include record sales volumes of oil, a resolution of an overseas tax dispute, deep-water drilling successes, and increased discretionary cash flow. As a long, tall Texan and one of the largest independent oil and gas companies, Anadarko is becoming even greater with investment in prior plays finally coming to fruition. I believe this is a company that should be on the list of every oil and gas investor not just because of recent reported results, (although that doesn't hurt), but because this is a company that is always looking toward the future, diversifying where needed and investing in smart plays.

Having been a non-operating partner with BP (NYSE:BP) during the 2010 disaster, the company has bounced back being active again offshore in both the U.S. Gulf of Mexico as well as overseas including the Caesar/Tonga development in the Gulf of Mexico deepwater. In this development, Anadarko estimates that the first three subsea wells will provide a base of 200 million to 400 million barrels of oil equivalent with production expected to be about 45,000 barrels of oil equivalent per day. In a statement made in March, Al Walker, President and COO said, "Caesar/Tonga is yet another capital-efficient, deepwater project in our Gulf of Mexico portfolio that we have successfully developed. This development and the Gulf of Mexico are an important part of Anadarko's liquids growth and our domestically produced energy."

Success is also expected with the Lucius project at Keathley Canyon where Anadarko, with a 35% working interest, is one of several co-venturers. The project is expected to produce about 80,000 barrels of oil per day with anticipated first oil production in 2014, and close to 450 million cubic feet of natural gas per day. Another joint venture showing signs of success is the Heidelberg project where Anadarko operates Green Canyon block 903 with a 44.25% working interest and co-owners Enersis (ENI) with 12.5%, Apache (NYSE:APA) 12.5%, Statoil (NYSE:STO), 12%, Exxon Mobil (NYSE:XOM), 9.375%, and Cobalt International Energy, (NYSE:CIE) 9.375% contributing to the successfully confirmed extension of up to 1,500 acres in the sidetrack appraisal well providing validation of the field's estimated resource range. The well was drilled to a total depth of approximately 30,440 feet in water depths of approximately 5,260 feet. The appraisal confirms that it is likely to produce about 200 million barrels.

In addition, Anadarko, together with Cove Energy (COV.LN), an upstream oil and gas company that is in the process of getting gobbled up by Royal Dutch Shell PLC (RDS-A, RDS-B), hit pay dirt while testing the Barquentine-1 well at the northern end of the Rovuma Basin Area 1 block, Offshore Mozambique. The test revealed that the well flowed gas at an equipment constrained rate of 100 million cubic feet per day, or MMcf/d, with minimal pressure drawdown.

On Anadarko's home front, things just seem to keep going its way. In Ohio, an area that has been successful for rival Chesapeake Energy (NYSE:CHK), Anadarko, in just its first 20 days, has at least one well producing 9,500 barrels of light-gravity crude. The company has 390,000 acres in the Utica shale, with two other wells producing a combined 37 million cubic feet of liquids-rich natural gas and 20,000 barrels of light-gravity crude within two months. In addition many other domestic plays are showing signs of success such as Anadarko's Wattenberg Horizontal program in northeastern Colorado where it is estimated to hold net resources of 500 million to 1.5 billion barrels of oil equivalent.

Anadarko had earnings of $2.16 billion for the first quarter of 2012, or $4.28 a share, way up $216 million, or 43 cents a share, posted in the first quarter 2011. Attributing to this boost is the settlement reached in early March with Algeria's state-owned company, Sonatrach. The agreement will increase Anadarko's revenue by $1.8 billion over 12 months, receiving $1billion this year and the remainder during the first half of 2013. The settlement also increases Anadarko's share of crude oil from the Algerian wells.

First quarter sales volume was the equivalent of 64 million barrels of oil, beating a quarterly forecast given in March of 61 million to 63 million barrels, resulting in a sales increase of 6.2% to $3.45 billion. Revenue of $3.45 billion in the quarter exceeded the year-ago figure of $3.25 billion. A 24.2% rise in oil and condensate revenues contributed to the year-over-year growth in revenue. Total cost and expenses for this first quarter were $2.54 billion, excluding the Algeria tax settlement, versus $2.35 billion in the year-ago quarter. Cash flow from operations was $1.89 billion versus $1.28 billion in the first quarter 2011. Capital expenditure during first quarter 2012 was $1.79 billion, increasing slightly from $1.58 billion in the first quarter 2011.

Anadarko was recently ranked fourth as the top workplaces in the U.S. by Workplace Dynamics, and was selected as the Top Workplace in Houston in both 2010 and 2011, for companies with more than 1,000 employees. After the announcement, Anadarko Chairman and CEO Jim Hackett stated, "In today's world where businesses compete on a global scale for top talent, we recognize the importance of offering a work environment that values each employee at a personal level. Combining a strong commitment to our core values with a deep portfolio of assets worldwide empowers our employees with the freedom to constantly learn and improve at every level and makes Anadarko a challenging and rewarding place to work."

A happy workforce is just one of the key ingredients for a successful, profitable business. Anadarko keeps on keeping on with successful operations in a variety of places including China, Brazil, and New Zealand. The company combines domestic affairs with overseas operations to help make up about 75% of liquid production. Anadarko's combined efforts of well-managed resources, keen exploration moves, and great financials is solid evidence for buying this company for long-term investment.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.