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- Anadarko Petroleum will present its fourth-quarter earnings report in February.
- Oil production is expected to pick up, while natural gas operations are likely to decline.
- The company could still face $3.5 billion penalty payments.
Why Anadarko Petroleum Could Be A Good Pick In A Challenging Crude Environment
- Anadarko is doing the right thing by investing in high-margin oil assets, as this will allow it to improve its bottom line performance as oil pricing improves.
- Anadarko's focus on LNG will help it benefit from a growing market.
- As compared to peers such as Apache, Anadarko's bottom line is expected to grow in the next five years, which indicates that the company is adopting smart strategies.
- Anadarko Petroleum has suffered as oil pricing has taken a hit and OPEC might not cut production.
- Anadarko, however, is improving production profile and this will help it profit from an improvement in oil market dynamics in the long run.
- Anadarko's impressive cash flow figures and expected long-term earnings improvements indicate that there is hope for the company after the current weakness is over.
- Anadarko Petroleum expanded its "high-confidence" area in the Delaware Basin capable of targeting the Wolfcamp intervals.
- Anadarko has brought several wells online in the Delaware Wolfcamp that had 30-day IP rates above 1,000 BOE/d.
- Currently the Permian doesn't have enough pipeline takeaway capacity out of the region, which is pushing down realized prices.
- New pipelines being built will help alleviate the strain surging oil production has put on existing infrastructure in the area.
- The fall in oil prices has pushed Anadarko down from $110 a share to below $90, opening up a buying opportunity.
- Anadarko Petroleum increased its Wattenberg output by 87% year-over-year to 189,000 BOE/d, making the play a major source of liquids growth.
- A liquids heavy production mix makes the Wattenberg a very economical play.
- Near term start up of the Lucius Gulf of Mexico project will pad Anadarko's oil production levels.
- Negative FCF and $6.3 billion in net debt should be closely watched.
- APC boasts a high quality asset base and an excellent track record.
- It continues to be the most active portfolio manager among its peers and has outperformed its peers YTD.
- It offers an ideal combination of upstream operational momentum and value acceleration potential to drive further outperformance.
Anadarko Posts Strong Revenue Growth Despite Oil Price Slump
- Anadarko was able to secure total revenues of $5 billion, which were 30% higher than the revenues reported a year ago in the corresponding quarter.
- Anadarko is following up on its portfolio management initiatives by divesting from low margin projects to divert capital towards projects that are displaying signs of strong growth in the future.
- The oil market could remain volatile in the future, but Anadarko sees this as an opportunity to buy off oil producing assets at bargain prices in the future.
- The recent partnerships that have surfaced indicate that Anadarko is working towards strengthening its long term growth prospects.
Third Quarter Result Expectations And Investor Outlook For AnadarkoAll Bases Covered • Oct. 27, 2014
- The company was able to deliver on the sales front and recorded sales of 848,000 barrels of oil equivalent per day.
- For the Wattenberg Field, the company has plans to drill nearly 360 horizontal wells and operate 13 rigs in the field on average.
- Its 52 week low comes in at $73.60, while the 52 week high comes in at $113.51. Analysts expect share prices to reach $120.63 in the next year.
- Oil and gas prices remain volatile in the market and their impact on future revenues remain uncertain.
There's More To Anadarko's Declining Price Than Just Oil Price Correction
- Oil price decline is one contributing factor in Anadarko’s lowered stock price, but it is not the whole story.
- Company’s operations looked strong, as depicted by increased revenues in the first half, but will the company maintain the same standing in the second half?
- No unexpected increase is anticipated in dividends, as well as share repurchases.
- Anadarko derives more than 60% of its revenues from oil products and is currently focusing its business more on oil rather than natural gas.
- The company has completed all major work at the Lucius Project and has completed the Heidelberg Project.
- The company achieved production milestones in two of its oil projects during the second quarter which will further enhance the oil segment’s contribution to total revenue.
- Anadarko is also building one of the largest LNG projects ever taken up by a Western energy company in Mozambique but there are certain risks associated with this project.
- These projects would significantly increase production volume but due to falling oil, natural gas, and LNG prices the profit margin is going to be squeezed in the coming years.
- Anadarko’s second quarter total hydrocarbon production stood at 848,000 barrels of oil equivalent per day, 50,000 barrels more per day than the previous year, and a record for the company.
- Deutsche Bank choose Anadarko Petroleum Corp. as one of their top picks with a $137 price target, 29% higher than the current price.
- Anadarko has consistently added about 51% more hydrocarbon reserves to its existing reserves than its production each year.
- The Wattenberg Field continues to benefit the company in the long term, as the company seeks to drill over 360 additional wells in the current year.
- Additionally, Anadarko has a well-positioned portfolio of U.S. assets, and is determined to increase its liquid contribution to around 45 percent of the total production.
- The company expects its 2014 capital budget to be around $8.6-$8.8 billion, and aims to retain the historical reserve replacement ratio of 150 percent.
- However, the $15 billion LNG project poses certain risks, such as start-up delays and overrun costs.
- Anadarko Petroleum’s focus towards growing liquid and oil production is paving the path for future growth.
- Its industry-leading liquid and oil assets with higher margins and strong cash generating potential putts it in a position to post big profits in the coming quarters.
- Anadarko is an attractive pick with the recent fall in price.
- Anadarko’s onshore assets, particularly the Wattenberg field, are well positioned to ensure bright long-term growth prospects for the company.
- The company expects to grow its hydrocarbon sales volume from the Wattenberg field by a CAGR of 20% in the long run.
- The company is also well positioned in the Gulf of Mexico.
- With the progression of recent projects, the company is expected to deliver increased sales volume.
Is Anadarko Petroleum Overvalued Or Should You Buy Now?
- Anadarko has seen its stock skyrocket from $80 in April to around $110. The rise was mostly due to the settlement of a US Justice Department case.
- The financial metrics look good for Anadarko. Among these metrics are EV/EBITDA, Return on Capital, and Debt to Equity (even with the new bond issue).
- Anadarko is a strong player in many major finds throughout the world, including Eagle Ford and Marcellus Shale.
- Catalysts for an increase in stock price include; issues in the Middle East, a possible merger/acquisition, and high net asset value per share.
Anadarko Petroleum Isn't The Best House In The Independent Drilling NeighborhoodAbba's Aces • Jul. 7, 2014
- The ominous cloud over the spill cleanup case has been lifted.
- The stock is fairly valued on 2015 earnings estimates.
- The technicals indicate some more downward momentum on the price of the stock.
Wed, Jan. 21, 3:59 PM
- Credit Suisse thinks it is still too early to buy E&P equities but the picture should brighten by late in Q1, when the firm suggests the time could be right to make a play for the strong balance sheets offered by the likes of Anadarko Petroleum (NYSE:APC), Devon Energy (NYSE:DVN), EOG Resources (NYSE:EOG), Marathon Oil (NYSE:MRO) and Pioneer Natural Resources (NYSE:PXD).
- E&P stocks historically have been highly anticipatory, the firm says, with the stocks moving ahead of crude oil, adding that the key leading indicator of U.S. drilling and completion activity is U.S. drilling permits.
Tue, Jan. 20, 12:26 PM
- As the penalty phase starts today in BP's (BP -0.6%) trial over the 2010 Gulf of Mexico oil spill, a U.S. prosecutor says in opening statements that the company is overstating how well it handled the 2010 Gulf of Mexico oil spill, and that the company should not get much of a break on $13.7B in potential fines for merely complying with the law..
- According to court papers, BP will argue its $42B in liabilities including $14B spent on cleanup efforts should prompt the judge to reduce environmental penalties, and that falling oil prices change the equation as its U.S. oil production unit has operated in the red since the spill and will have less capacity to weather a big fine.
- Anadarko Petroleum (APC -1.5%), which faces its own penalty of as much as $3.5B because it owned 25% of the oil well drilled by the Gulf rig, also will put up a fight as APC's lawyers say the company was "a faultless, non-operating investor" in the Deepwater Horizon venture.
Tue, Jan. 13, 3:23 PM
- J.P. Morgan's Joseph Allman is “mildly bullish” on oil and gas E&P companies in 2015, as short-term nervousness about the oil market’s oversupply is outweighed by the benefits of low oil prices, declining service costs and a more balanced oil market.
- Allman’s favorite picks among big-cap names are EOG, APC and NBL, among mid-caps are XEC and PXD, plus PDCE in the small-cap space; his least favorite stocks are APA, AREX, GDP and JONE.
- Among majors, JPM analysts Phil Gresh and John Royall initiate SunCor (NYSE:SU) at Overweight, citing "top tier sustainable dividend coverage and leverage, with some underlying growth potential"; the pair also downgrade Cenovus (NYSE:CVE) to Neutral, tags ConocoPhillips with an Underweight rating, and are neutral on Exxon (NYSE:XOM) and Chevron (NYSE:CVX).
- Earlier: Valero Energy upgraded, Marathon Petroleum downgraded at J.P. Morgan
- ETFs: XLE, ERX, VDE, OIH, XOP, ERY, DIG, DUG, IYE, IEO, PXE, FENY, PXJ, RYE, FXN, DDG
Fri, Jan. 9, 6:12 PM
- The 5th U.S. Circuit Court of Appeals in New Orleans refuses to reconsider its 2014 ruling that BP cannot avoid federal penalties for the 2010 Gulf of Mexico oil spill by blaming another company's failed equipment.
- BP and minority partner Anadarko (NYSE:APC) had argued they should not face federal Clean Water Act penalties because the oil leaked not from the Macondo well but from the broken underwater riser that had connected the well to the Deepwater Horizon rig owned by Transocean (NYSE:RIG).
Wed, Jan. 7, 7:35 PM
- Energy bonds have become one of the riskiest sectors in the bond market, as the cost of buying five-year credit default swaps protecting $10M of bonds has jumped from $139K/year last June to $377K today for companies in the S&P/ISDA CDS U.S. Energy Select 10 Index.
- The index consists of 10 large major energy companies: APC, APA, CHK, COP, DVN, OTCQB:FSTO, HAL, BTU, VLO and WMB.
- Even though most of the companies boast investment-grade ratings, it now costs more to insure bonds in that index against default than it costs to insure bonds of an average junk-rated company, according to S&P.
Mon, Jan. 5, 12:18 PM
- Energy stocks severely underperform the broader market, with the sector -4.2% vs. the S&P 500's -1.4%, as U.S. oil prices briefly slip below $50/bbl for the first time since April 2009; Nymex crude recently was -4.4% at $50.37, while Brent crude -5.9% at $53.08.
- Among the day's biggest losers: DNR -9%, RIG -7.6%, NBR -4.8%, CHK -5.9%, SDRL -9.1%, SD -12.3%, NOV -5.9%, PSX -6.2%, APA -5.9%, DVN -4.4%, EOG -6%, SU -5.2%, OXY -4.2%, APC -8.7%, PWE -9%, ECA -5.5%, MRO -5.3%.
- Global oil majors, which have been seen as less vulnerable to falling oil prices, are posting big losses: XOM -2.7%, COP -4.5%, CVX -3.8%, BP -5.8%, RDS.A -4.6%, TOT -6.5%.
- ETFs: USO, XLE, OIL, UCO, ERX, VDE, OIH, SCO, XOP, ERY, FCG, DIG, PBW, BNO, GASL, DTO, DBO, DUG, IYE, XES, IEO, QCLN, IEZ, UWTI, PXE, USL, PXI, FENY, DWTI, PXJ, DNO, PSCE, RYE, SZO, PUW, FXN, OLO, DDG, HECO, TWTI, OLEM
Dec. 22, 2014, 7:10 PM
- While the U.S. government wants BP to pay $16B-$18B in fines related to the 2010 Gulf of Mexico oil spill, the company is opening the latest round of its legal battle by arguing in a court filing that it should pay a lesser penalty partly because of the falling price of crude oil.
- In a filing to the Louisiana District Court, BP suggests that "a per-barrel penalty at the lower end of the statutory range would satisfy the goals of [the Clean Water Act].”
- Judge Barbier in New Orleans will conduct a non-jury trial next month to set pollution fines for BP and its well partner, Anadarko Petroleum (NYSE:APC).
- Meanwhile, BP says it signed a joint venture deal with Azerbaijan's Socar to explore for and develop potential prospects in the shallow water area around the Absheron Peninsula of the Caspian Sea.
Dec. 22, 2014, 10:45 AM
- Natural gas prices fall 9.5% to near two-year lows at $3.133/mmBtu, in the biggest one-day percentage loss since February and the lowest intraday price since January 2013, on mild weather forecasts and inventory that is above year-ago levels.
- Prices are now down more than 15% in three straight losing sessions and are 30% lower than the six-month high closing price of $4.489/mmBtu it hit just a month ago.
- Weather has been unseasonably warm for December, limiting demand for home heating and allowing relatively low stockpiles to catch up to where they were a year ago and encouraging traders to sell based on the belief that supply is relatively healthy.
- Gas producers are among the biggest early decliners: XOM -1.1%, CHK -7.3%, APC -2.6%, SWN -6%, DVN -2.2%, COP -2.3%, BP -1.5%, COG -4%, BHP -1.9%, CVX -1.3%, ECA -5.1%, EQT -4.3%, RDS.A -1.7%, UPL -12%, WPX -6.9%, EOG -1%, OXY -1.1%, RRC -6.1%, APA -2.3%, AR -3.2%, CNX -3%, QEP -4.8%, LINE -4.9%, NBL -1.6%, SM -2.6%, XEC -4.2%, PXD -2.9%, NFX -5.1%.
- ETFs: UNG, DGAZ, UGAZ, BOIL, GAZ, FCG, GASL, KOLD, UNL, NAGS, DCNG
Dec. 17, 2014, 2:20 PM
- New York Gov. Cuomo's administration says it will ban fracking statewide, citing health concerns and what it considers as limited economic benefits to drilling.
- NY's acting health commissioner said at a cabinet meeting in Albany today that studies on fracking’s effects on water, air and soil are inconsistent, incomplete and raise too many “red flags” for the state to allow it; the state Department of Environmental Conservation will now issue a legally-binding recommendation prohibiting fracking.
- The state has had a de facto moratorium on fracking for more than six years, so nothing really changes with today's decision.
- Parts of New York sit atop the gas-rich Marcellus shale formation, whose top producers include CHK, RRC, RDS.A, RDS.B, TLM, APC, ATLS, COG, CVX, CNX, EQT, EOG, XOM, WPX, XCO, CRZO, SWN, AR.
Dec. 16, 2014, 7:21 PM
- "Low oil prices cure low oil prices,” meaning that low oil prices will take supply off line - primarily shale oil production in North America - and eventually prices will recover; if that maxim becomes reality, then it could be time pick up select energy stocks today at cheap prices, some analysts say.
- U.S. Global Investors' Brian Hicks, who believes oil is oversold, favors Devon Energy (NYSE:DVN) for its low-cost Eagle Ford acreage purchased earlier this year, solid cash flow, and significant hedges in place on 2015 production; he also likes oil services companies Noble Corp. (NYSE:NE) and Helmerich & Payne (NYSE:HP).
- Hodges Capital's Michael Breard likes North American oil producers that have the flexibility to shift to natural gas - where prices are more likely to hold up, he says - such as Matador Resources (NYSE:MTDR), Comstock Resources (NYSE:CRK) and Panhandle Oil and Gas (NYSE:PHX).
- Deutsche Bank analysts like companies with the balance sheet strength to survive, but also the budget flexibility, asset quality and performance record to suggest they can return to growth when energy prices go back up, including Anadarko (NYSE:APC), EOG Resources (NYSE:EOG), Cimarex (NYSE:XEC) and Concho Resources (NYSE:CXO).
Dec. 5, 2014, 5:38 PM
- The Eagle Ford shale formation in south Texas produced its billionth barrel of oil some time last month, according to analysts at research firm Wood Mackenzie.
- Eagle Ford now accounts for 16% of total U.S. oil production, and the firm forecasts E&P spending of $30.8B in the region next year, ~22% of the total $139.3B expected in U.S. onshore spending.
- Eagle Ford is widely considered the most profitable U.S. shale field, and many analysts speculate the break-even price for production to remain profitable is ~$50/bbl in much of the play.
- Top Eagle Ford producers include EOG, CHK, COP, MRO, BHP, APC, APA, BP, COG, CRZO, CWEI, CRK, XOM, GDP, HES, MTDR, MUR, NFX, PVA, PXD, ROSE, RDS.A, RDS.B, SN, SM, STO, SFY, TLM, ZAZA
Dec. 2, 2014, 3:13 PM
- Apache (APA -1%), Bill Barrett (BBG -5.6%) and Laredo Petroleum (LPI -4.9%) are downgraded to Neutral from Buy at Mizuho, as the firm lowers its crude oil price deck and views OPEC's decision not to cut production as a structural shift in crude oil markets.
- Although the current excess supply/weak demand situation will be resolved gradually, market fundamentals will increasingly drive crude prices in a ~$70/bbl world, the firm says; in the E&P space, it prefers APC, MRO, FANG, RSPP and RICE.
Dec. 2, 2014, 2:48 PM
- Energy stocks (XLE +1.4%) are posting the day's largest gains among S&P sectors, rebounding from recent losses even as Nymex crude oil fell another $2.05 to $66.97/bbl.
- Refiners Marathon Petroleum (MPC +4%) and Valero (VLO +4.1%) and pipeline operator Williams Cos. (WMB +1.5%) are among the top gainers, while losers include most oil services companies such as Halliburton (HAL -2.2%) and rig operator Transocean (RIG -3.7%).
- Anadarko Petroleum (APC +1.6%), Cimarex Energy (XEC +1%), Devon Energy (DVN +0.7%), EOG Resources (EOG +3.8%) and Marathon Oil (MRO +3.5%) were selected top “safe haven” picks for analysts at Tudor Pickering Holt, which said they are “liquid names with high-quality assets and healthy balance sheets."
Nov. 28, 2014, 7:25 AM
- OPEC yesterday decided to hold production numbers despite the bear market in oil. WTI crude is down about $5 per barrel to $69.
- A premarket look at the top 10 holdings of the XLE: Exxon Mobil (NYSE:XOM) -4.1%, Chevron (NYSE:CVX) -4.1%, Schlumberger (NYSE:SLB) -4.6%, ConocoPhillips (NYSE:COP) -4.4%, EOG Resources (NYSE:EOG) -4.3%, Pioneer Natural Resources (NYSE:PXD) -4.8%, Occidental Petroleum (NYSE:OXY) -4.3%, Haliburton (NYSE:HAL) -4.7%, Anadarko Petroleum (NYSE:APC) -5%, Williams Companies (NYSE:WMB) -1.6%.
- ETFs: ERX, VDE, OIH, XOP, ERY, FCG, DIG, PBW, GASL, DUG, IYE, XES, IEO, QCLN, IEZ, PXE, PXI, FENY, PXJ, PSCE, RYE, PUW, FXN, DDG, HECO
Nov. 25, 2014, 2:46 PM
- "Not surprisingly, billionaires reduced their energy allocations (NYSEARCA:XLE) during Q3," says Direxion, unveiling the quarterly rebalance for the iBillionaire Index (which serves as the benchmark for the IBLN ETF). Attention was instead shifted to healthcare (NYSEARCA:XLV) and materials (NYSEARCA:XLB), with companies like Humana (NYSE:HUM) and Monsanto (NYSE:MON).
- Also added to the index: TMO, GM, FB, CBS, GOOG, MAS, APD, DAL, NOV, WHR, THC, ABBV.
- Dropped from the index: AIG, MCK, CTSH, MSI, RIG, CI, APC, GPS, MSFT, CMCSA, NFLX, MHFI, WMB, ICE.
- Outlying sectors: Consumer Discretionary (NYSEARCA:XLY) makes up 23.33% of the iBillionaire Index vs. 11.68% for the S&P 500, and Industrials (NYSEARCA:XLI) and financials (NYSEARCA:XLF) make up just 6.67% each of the index vs. 10.44 and 16.30 of the S&P 500, respectively. Consumer Staples (NYSEARCA:XLP) have zero representation in the index vs. 9.7% in the S&P 500.
- Previously: Direxion launched an ETF with iBillionaire today
Nov. 21, 2014, 5:55 PM
- Four years after the Deepwater Horizon disaster, giant new oil projects are returning to the Gulf of Mexico - bigger and more expensive than ever - even as U.S. oil prices are below $80/bbl at a four-year low.
- New projects alone have the combined capacity to pump ~900K bbl/day: Hess (NYSE:HES) said Monday it had started pumping crude from its deepwater Tubular Bells installation, Exxon (NYSE:XOM) and Anadarko (NYSE:APC) plan to start up two more major Gulf projects in coming months, and Hess, Chevron (NYSE:CVX) and other partners recently OK'd a $6B Gulf development.
- Even BP is returning in a big way, with two Gulf projects and plans to spend $4B/year in the Gulf for the next decade, as it works on technology to drill at greater depths.
- All this is happening even as costs are jumping, partly because companies are drilling farther from shore and in deeper waters; deepwater wells are up to 25% more expensive today than in 2010, and drilling the average deepwater Gulf well takes 13% longer than it did before the 2010 spill.
- Shell’s (RDS.A, RDS.B) 100K bbl/day Olympus, which came online ahead of schedule and under budget, began tapping oil and gas in the Gulf in February; it is also working on a new Gulf project that will tap an oil field under 9,500 feet of water, 3x deeper than Olympus.
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