Anadarko Petroleum's Natural Gas Volume on the Rise

Buy-recommended Anadarko Petroleum (APC) offers unlevered appreciation potential of 23% to estimated net present value [NPV] of $82 a share, concentrated 52% on North American natural gas. Natural gas and oil volume gained 13% in the fourth quarter over the third quarter according to results reported after 6:00 PM EST on February 4. Projected volumes along with current futures prices promise a continuing high level of unlevered cash flow (Ebitda).

On December 18 we increased NPV from $74 a share prompted by an increase in long-term oil price for calculating present value to $80 from $66 a barrel. NPV is supported by projected cash flow capitalized at unlevered multiples (PV/Ebitda) related to reserve life (Adjusted R/P). By the final estimates for the latest year, only 10% of hydrocarbon reserves are in Algeria where the host government appears to have reneged on its contracts. Finally, a strong uptrend in oil price portends catch up for natural gas.

Originally published on February 5, 2008.