Anadarko Petroleum Expected to Raise Its Production Guidance

Investors should buy shares of Anadarko Petroleum Corp. (APC) ahead of its March 25 analyst meeting because the company will likely increase its production guidance, says Citigroup’s Gil Yang. The analyst boosted his forecast for 2008 production growth from 6% to 7%, while maintaining a “buy” recommendation and $72 price target on the shares.

He also said the capital raised from Anadarko’s sale of its stake in the Peregrino field offshore Brazil and the Kaskida unit in the Gulf of Mexico for $1.8-billion, plus an additional consideration valued at $300-million, is a good strategic move because it allows the company to pay down debt and eliminate $3 to $6-billion of potential capital expenditure over the next seven years. Mr. Yang expects some of the $200-million in freed up capital will go toward speeding up near-term growth this year.

“In an environment with little service cost inflation and high commodity prices we think that this will be an optimistic meeting,” he said in a note to clients, adding that Anadarko’s recent infrastructure expansions in the Rockies and ‘non-dilutive’ divestitures of non-producing assets should lead to better-than-expected growth in 2008.

The analyst also raised his earnings per share estimate for 2008 from $3.34 to $3.73.